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,f  EXERCISES  IN 
-^URRENT  ECONOMICS 


HAMILTON 


THE  UNIVERSITY  OF  CHICAGO  PRESS 


Digitized  by  the  Internet  Archive 

in  2007  with  funding  from 

IVIicrosoft  Corporation 


http://www.archive.org/details/exercisesincurreOOhamirich 


MATERIALS  FOR  THE  STUDY 
OF  ECONOMICS 


EXERCISES  IN  CURRENT  ECONOMICS 


THE  UNIVERSITY  OF  CHICAGO  PRESS 
CHICAGO.  ILLINOIS 


Bgents 

THE  BAKER  &  TAYLOR  COMPANY 

SEW  YORK 

THE  CUNWIHGHAM,  CURTISS  &  WELCH  COMPANY 

LOS  AKSELES 


THE  CAMBRIDGE  UNIVERSITY  PRESS 

LONDON  ASO  EDIKBUBen 

THE  MARUZEN-KABUSHIKI-KAISHA 

TOrrO,  OSAKA,    KTOTO,   FCKUOEA,   SEITDAI 

THE  MISSION  BOOK  COMPANY 

SHANeBAI 

KARLW.  HIERSEMANN 

LBIPZie 


EXERCISES  IN 
CURRENT  ECONOMICS 


By 

WALTON  HALE  HAMILTON 


THE  UNIVERSITY  OF  CHICAGO  PRESS 
CHICAGO,  ILLINOIS 


^^v=-^'^ 


Copyright  1916  By 
The  University  of  Chicago 


All  Rights  Reserved 


Published  September  igx6 


Composed  and  Printed  By 

The  University  of  Chicago  Press 

Chicago.  Illinois,  U.S.A. 


PREFACE 

This  book  of  exercises  has  been  prepared  to  accompany  the 
author's  Current  Economic  Problems.  As  complementary  expressions 
of  the  same  conception  of  economics  and  the  same  method  of  teach- 
ing, unity  and  completeness  are  to  be  found  only  in  the  two  volumes 
together. 

The  Exercises  follows  the  Problems,  division  by  division,  and 
section  by  section.  In  this  volume  each  of  the  sections  falls  into  four 
parts.  The  first  gives  a  short  statement  introductory  to  the  topic 
announced.  These  statements  supplement  the  introductions  to  the 
divisions  in  the  Problems,  and  are  intended  to  give  to  the  divisions 
the  unity  which  the  introductions  to  the  divisions  attempt  to  give 
to  the  treatment  as  a  whole.  The  second  gives,  by  number,  a  list 
of  supplementary  readings  in  the  Problems.  These  are  intended  to 
show  something  of  the  many  cross-currents  in  economic  life  and  to 
indicate  the  intimate  connection  between  seemingly  independent 
problems.  Since  the  sections  bear  the  same  titles  as  those  in  the 
Problems,  it  has  seemed  superfluous  to  enumerate  the  required  read- 
ings. The  third  gives  a  list  of  questions  based  directly  upon  the 
readings.  An  attempt  has  been  made  to  word  them  in  such  a  way 
that  they  do  not  call  for  mere  reproduction;  that  in  answering  them 
the  student  is  forced  to  give  something  of  his  own.  The  fourth  pre- 
sents a  series  of  problems  based  indirectly  upon  the  readings.  They 
are  intended  to  test  the  student's  acquisition  of  something  more  thsm, 
the  mere  language  of  economics,  his  assimilation  of  readings  present- 
ing material  from  divergent  viewpoints,  and  his  ability  to  orient  his 
thought  in  the  face  of  conflicting  opinions  and  testimony.  These 
problems  form  the  real  test  of  the  student's  reading  and  study. 

The  character  of  the  Problems  has,  of  course,  been  determined 
by  the  theory  underlying  the  two  books.  There  are  fewer  problems 
calling  for  the  mere  accumulation  of  evidence  and  the  annihilation 
of  fallacies  than  usual.  There  are  more  whose  objects  are  the  clear 
statement  of  the  real  issues  in  the  problems  discussed,  the  logical 

366490 


viii  PREFACE 

implications  of  viewpoints  and  programs,  and  the  correlation  of 
problems.  This  accounts  for  the  prevalence  of  direct  quotations 
followed  by  the  monotonous  injunction  of  "illustrate,"  "develop," 
"criticize,"  and  "appraise."  Above  all,  the  idea  in  selection  has 
been  to  introduce  the  student  to  "current  economic  problems,"  not 
to  particular  problems. 

How  much  of  the  book  is  new,  who  can  say?  The  author  is 
under  serious  obligations  to  the  authors  of  several  books  of  problems, 
for  many  of  the  exercises  in  this  volume.  But,  since  hardly  one  was 
used  without  more  or  less  change  in  form  to  adapt  it  to  the  particular 
purpose,  it  seems  unfair  to  charge  the  original  authors  with  full 
responsibility.  Further,  the  customary  designation  of  indebtedness 
by  initial  fails  to  convey  the  full  measure  of  the  obligations  which 
the  author  is  under  to  those  who  have  compiled  books  of  problems, 
either  for  personal  or  for  general  use.  The  general  influence  of  these 
books  in  determining  the  character  and  contents  of  the  present 
volume  has  been  so  great  that  indebtedness  for  specific  problems  is 
small  by  comparison. 

After  long  debate  the  author  has  concluded  to  exclude  bibliog- 
raphies from  this  volume.  Exhaustive  bibliographies  require  too 
much  space  and  are  almost  worthless  in  an  introductory  course. 
Selected  bibliographies,  meeting  the  needs  of  the  author,  would 
probably  fail  to  satisfy  anyone  else  who  is  using  the  book.  The 
instructor,  from  the  materials  which  are  at  hand,  will  find  no  trouble 
in  being  able  to  find  suitable  supplementary  reading.  For  the  author 
to  undertake  to  make  the  selection  for  the  instructor  would  rob  the 
latter  of  the  intellectual  liberty  to  give  his  own  course,  which  it  is 
one  of  the  objects  of  this  method  to  efi"ect. 

W.  H.  H. 

Amherst  College 
May  8,  1916 


CONTENTS 

PAGE 

Introductory i 

1.  The  Nature  of  Current  Economic  Problems       ....  i 

I.  The  Antecedents  of  Modern  Industrialism    ....  4 

2.  Ideals  Underlying  Industrial  Development 4 

3.  Manorial  and  Gild  Economy '' .      .  5 

4.  Mediaeval  Commerce 6 

5.  Mediaeval  Industrial  Policy .  7 

6.  Mediaeval  Economic  Theory 8 

II.  The  Industrial  Revolution 10 

7.  The  Antecedents  of  the  Revolution 10 

8.  The  Nature  and  Scope  of  the  Revolution 11 

9.  Labor  and  the  Revolution 12 

10.  The  New  Industrialism 13 

11.  The  Extension  of  Industrialism 13 

III.  Social  Control  in  Modern  Industrialism 15 

12.  The  Nature  of  Progress 15 

13.  The  Control  of  Economic  Activity 16 

14.  The  StSLtement  oi  the  Laissez-faire  Theory 17 

15.  The  Interpretation  of  Laissez-faire 18 

16.  The  Protest  against  Individualism 19 

17.  The  Theory  and  Program  of  Social  Control       ....  20 

18.  Conservative  Factors  in  Development  of  Social  Control    .  21 
r9.  The  Basis  of  National  Efficiency         22 

IV.  The  Pecuniary  Basis  of  Economic  Organization  ...  23 

20.  Price  as  an  Organizing  Force 23 

21.  Pecuniary  Competition 23 

22.  Price-Fixinfe  by  Authority 25 

23.  The  Function  of  Middlemen 25 

24.  Speculation ....*.  26 

25.  The  Corporation 28 

ix 


X  CONTENTS 

PAGE 

V.  Problems  of  the  Business  Cycle       .......  30 

26.  The  Delicate  Mechanism  of  Industry 30 

27.  The  Economic  Cycle 31 

28.  The  Antecendents  of  Crises 31 

29.  The  Course  of  a  Crisis 32 

30.  Financial  and  Industrial  Conditions  during  a  Crisis     .      .  33 

31.  Industrial  Conditions  during  a  Depression 33 

32.  Typical  Theories  of  Crises 34 

33.  Credit  and  Crises 35 

34.  Control  of  the  Industrial  Cycle 36 

VI.  Problems  of  International  Trade 38 

35.  The  Basis  of  International  Trade 38 

36.  The  Mechanism  of  International  Trade 39 

37.  The  Demand  for  Local  Protection 40 

38.  The  Perennial  Argument  for  Protection 41 

39.  The  Case  for  Protection 41 

40.  The  Influence  of  the  Tariff  on  Wages 43 

41.  The  Historical  Setting  of  the  Current  Tariff  Problem  .     .  44 

42.  The  Argument  from  Experience 45 

43.  The  Impracticable  Nature  of  Protection 46 

44.  The  Scientific  Revision  of  the  Tariff 47 

VII.  The  Probxem  of  Railway  Regulation 48 

45.  The  Fundamental  Factors  in  the  Problem 48 

46.  Discriminatory  Practices  of  the  Railroads 49 

47.  The  Nature  and  Extent  of  Regulation 50 

48.  Aspects  of  Rate-Making 51 

49.  Valuation  of  the  Railroads 51 

50.  Government  Ownership  of  Railroads 53 

VIII.  The  Problem  of  Capitalistic  Monopoly 55 

51.  Is  Monopoly  Inevitable  ? 55 

52.  Conditions  of  Monopolization 56 

53.  The  Influence  of  Monopoly  on  Price       .  * 57 

54.  Types  of  Unfair  Competition 58 

55.  The  Government  and  Monopoly 59 

56.  The  Social  Problem  of  Monopoly 59 


CONTENTS  XI 

PAGE 

IX.  The  Problems  of  Population .  6i 

57.  The  Question  of  Numbers 61 

58.  The  Malthusian  Theory 62 

59.  The  Coming  of  the  Immigrant 6$ 

60.  Immigration  and  Industrial  Development 64 

61.  Immigration  and  Labor  Conditions 65 

62.  The  Further  Restriction  of  Immigration 66 

6^.  Immigration  and  Our  Future 67 

64.  The  QuaUty  of  Population 68 

X.  The  Problems  of  Economic  Insecurity 70 

65.  Insecurity  under  Modern  Industrialism 70 

66.  Unemployment 71 

67.  Industrial  Accident 72 

68.  Sickness  and  Old  Age 73 

69.  The  Standard  of  Living 74 

70.  The  Minimum  Wage 74 

71.  Compulsory  Arbitration  and  Wages ^    .  76 

XL  The  Problems  of  Trade  Unionism 77 

72.  Group  and  Class  Consciousness 77 

73.  The  Viewpoints  of  Laborer  and  Capitalist 78 

74.  Character  and  Purposes  of  Trade  Unions 79 

75.  The  Theory  of  Unionism 80 

76.  The  Weapons  of  Industrial  Conflict 81 

77.  Scientific  Management  and  Unionism 82 

78.  Unionism  and  the  Anti-Trust  Laws S^ 

79.  Revolutionary  Unionism 83 

XII.  Social  Reform  and  Legal  Institutions 85 

80.  The  Legal  System 85 

81.  Private  Property 86 

82.  Industrial  Liberty 87 

Ss.  The  Courts  and  Labor 88 

XIII.  Social  Reform  and  Taxation 90 

84.  Taxation  and  Industrial  Development    ...     .     .     .  90 

85.  The  Theory  of  Taxation 91 


xii  "  CONTENTS 


PAGE 


86.  The  Incidence  of  Taxation 91 

87.  "Unscientific"  Taxation 92 

88.  Tendencies  in  Taxation 93 

89.  The  Single  Tax 94 

XIV.   COMPREHENSI\'E  SCHEMES  OF  SOCIAL  REFORM         ....  96 

90.  The  Voice  of  Social  Protest 96 

91.  Individualistic  Schemes  of  Reform 96 

92.  The  Socialist's  Indictment  of  Capitalism 97 

93.  The  Case  for  Socialism .  98 

94.  Socialist  Arguments  for  the  Masses 99 

95.  Socialist  Programs 100 

96.  The  Case  against?  Socialism loi 

97.  Social  Panaceas 102 

98.  Economics  and  the  Future  of  Society 103 


INTRODUCTORY 

Note. — ^In  each  of  the  sections  of  this  book  the  foUowmg  symbols  are 
-employed:  A,  for  the  introduction  to  the  section;  B,  for  references  to 
other  readings  bearing  indirectly  upon  the  assignment;  C,  for  questions 
based  directly  upon  the  readings;  and  D,  for  problems  based  only  indi- 
rectly upon  the  readings.  Under  B  the  references  are  to  the  readings  in 
the  Problems  by  number,  not  by  page. 

I.    The  Nature  of  Current  Economic  Problems 

A.  Economics,  like  every  other  science,  attempts  to  answer  a 
fundamental  question  and  to  raise  a  fundamental  problem.  Its 
question  is,  Why  are  all  of  us  as  well  off,  or  as  bad  off,  as  we  are; 
and  why  are  some  of  us  better  off,  or  if  you  please  worse  off,  than 
others  ?^  Its  problem  is.  How  can  we  as  a  community  become  better 
off,  or  escape  becoming  worse  off,  than  we  are  at  present?  This, 
quite  likely,  involves  the  probability  of  some  of  us  becoming  better 
off,  or  worse  off,  than  we  are  at  present,  at  the  expense  of  others. 
Into  this  large  problem  the  miniature  problems  of  our  world,  which 
we  study  and  attempt  to  solve,  all  resolve  themselves.  Before 
studying  particular  problems  we  should  attempt  to  find  out  what 
an  economic  problem  is  like. 

B.  Current  Economic  Problems,  pp.  xxvii-xxxii.  Make  a  rapid 
survey  of  the  table  of  contents  of  the  volume,  pp.  xi-xxvi. 

C.  D.  I.  Make  a  list  of  the  more  important  questions  of  the  day. 
Which  of  these  are  exclusively  economic  ?  Which  are  primarily  eco- 
nomic? Which,  primarily  non-economic,  have  economic  aspects? 
Which  are  non-economic  ? 

2.  How  long  has  each  of  the  following  problems  confronted 
society:  rich  man  and  poor  man?  employer  and  employee?  the 
ratio  of  population  to  industrial  equipment?  competition  and 
monopoly?  industrial  crises?  unemployment?  elasticity  in  cur- 
rency? the  regulation  of  railway  rates?  the  valuation  of  public- 
service  utilities?  Show  the  beginnings  of  any  of  these  problems. 
What  of  the  end  ?  Use  your  knowledge  of  any  of  these  to  illustrate  the 
statement,  "Economic  problems  are  in  process  of  gradual  solution." 

3.  Make  a  list  of  a  dozen  problems  which  were  of  moment  ten  or, 
better  still,  twenty  or  thirty  years  ago.    What  has  become  of  each 

*  Edwin  Cannan,  Wealth,  v. 


2       .   CURRENT  ECONOMIC  PROBLEMS 

of  them?    What  are  the  various  ways  in  which  they  have  been 
disposed  of  ?    How,  after  all,  do  economic  problems  get  solved  ? 

4.  In  the  "solution"  of  these  problems  what  agencies  of  social 
control  were  used  ?  Was  an  effort  made  to  secure  immediate  results, 
or  was  society  content  to  secure  a  gradual  "improvement"  in  con- 
ditions? Did  the  attempt  at  solution  secure  the  result  at  which  it 
aimed,  or  did  the  entrance  of  new  and  unexpected  factors  give  an 
unlooked-for  result  ?  Was  attention  directed  to  the  real  problem  or 
only  to  a  superficial  aspect  of  it  ? 

5.  Did  the  existence  of  these  problems  in  the  past  imply  the 
existence  of  great  "evils"  ?  Did  their  "solution"  eliminate  the  evils 
or  only  change  their  form  ?  Were  they  attended  by  the  appearance 
of  any  new  and  unexpected  evils  ? 

6.  Can  we  hope  in  time  to  rid  ourselves  of  all  economic  ill? 
Can  the  fundamental  economic  problem  mentioned  in  the  introduc- 
tion to  this  lesson  eventually  reach  a  solution  ? 

7.  Can  an  economic  problem,  say  that  of  capitaHstic  monopoly, 
be  studied  and  solved  in  isolation  ?  Has  it  any  connection  with  the 
problem  of  protection  or  free  trade  ?  crises  and  depressions  ?  railway 
regulation?  the  "money  trust"?  trade  unionism?  immigration? 
the  relation  of  the  state  to  industry  ?    socialism  ? 

8.  State  two  alternative  solutions  of  the  current  problem  with 
which  you  are  best  acquainted.  Make  a  list  of  the  probable  conse- 
quences which  would  attend  each  solution.  Are  your  consequences 
all  economic  ?  If  not,  what  kinds  of  non-economic  consequences  are 
involved ?  Do  you  find  all  the  "good"  consequences  on  one  side  and 
all  the  "bad"  on  the  other?  How  are  the  good  and  bad  economic 
consequences  to  be  measured  against  each  other?  How  are  eco- 
nomic consequences  to  be  measured  against  political,  social,  ethical, 
and  religious  consequences  ?  How  is  a  judgment  between  these  pos- 
sible solutions  to  be  made?  Does  your  solution  dispose  of  the 
problem  in  its  entirety,  or  only  of  a  current  aspect  of  it  ? 

9.  Are  the  problems  of  rich  and  poor,  and  of  employer  and 
employee,  just  what  they  have  always  been  ?  Were  these  problems 
of  five  hundred,  one  hundred,  or  twenty  years  ago  just  what  they 
are  today?  Is  their  nature  affected  by  our  modern  social  arrange- 
ments, such  as  the  modern  state,  property,  and  contract  ?  Are  they 
affected  by  our  economic  institutions,  such  as  competition,  division 
of  labor,  and  international  trade?  Do  our  peculiar  "social  evalua- 
tions" of  classes,  institutions, 'and  activities  have  anything  to  do 
with  them? 

10.  Our  approach  to  the  end  of  the  "exploitative"  period  is 
bringing  about  what  changes  in  our  attitude  toward  economic  classes, 
institutions,  and  activities?    It  is  bringing  what  new  problems  to 


INTRODUCTORY  3 

the  front?    Are  these  problems  new,  or  only  new  to  us?    Can  we 
state  them  quite  accurately  in  terms  used  before  or  elsewhere  ? 

11.  "Economic  problems  are  aspects  of  social  development. 
Their  solution  is  to  be  found  in  the  direction  of  the  growth  of  social 
life  and  institutions."  By  concrete  examples  illu^rate  how  economic 
problems  are  to  be  studied  as  phases  of  a  general  developing  move- 
ment. How  does  this  method  of  treatment  differ  from  that  of  studying 
them  in  severalty?  From  this  viewpoint  show  the  necessity  of  a 
general  historical  setting  for  the  problems. 

12.  Show  that  each  of  the  problems  mentioned  in  this  exercise 
is  involved  in  the  fundamental  problem  of  economics  as  stated  in  the 
introduction  to  this  lesson.  State  that  problem  in  terms  of  its  general 
historical  setting. 

13.  Draw  up  in  an  orderly  form  the  conclusions  you  have 
reached  as  to  the  nature  of  current  economic  problems. 


I.    THE  ANTECEDENTS  OF  MODERN  INDUSTRIALISM 
2.    Ideals  Underlying  Industrial  Development 

A.  Our  economic  problems  have  their  being,  not  only  as  part  of  a 
particular  industrial  system,  but  as  part  of  a  peculiar  culture.  They 
are  rooted  in  our  vast  complex  of  businesses,  markets,  machines,  and 
industrial  functionaries;  but  their  life  comes  from  the  world  of  ideas 
in  which  they  thrive.  About  the  whole  material  life  and  activities 
there  lies  a  scheme  of  values,  standards,  attitudes,  and  habits  of 
thought  which  give  to  the  Western  world  a  spirit  and  purpose  all  its 
own.  Out  of  a  past,  reaching  into  the  vague  unknown,  this  scheme 
of  values  has  been  developed.  It  gives  character  to  our  system, 
determines  the  nature  of  its  problems,  and  in  myriad  subtle  ways 
conditions  their  solution.  To  understand  our  problems  aright  we 
must  enter  this  strange  world  of  values  and  ideas. 

C.  I.  Why  should  an  account  of  the  peculiar  characteristics  of 
modern  industrialism  be  presented  at  the  beginning  of  a  sketch  of 
economic  development?  2,  What  bearing  has  each  of  the  five 
characteristics  of  modern  industrialism  mentioned  in  i  upon  the 
nature  of  economic  problems?  3.  Show  the  devious  ways  in  which 
the  Christian  teachings  mentioned  in  2  imparted  to  our  social  system 
the  characteristics  mentioned  in  i. 

D.  I.  "After  the  fall  of  Rome  society  fell  apart  into  a  large 
number  of  small  groups.  The  universal  society,  which  had  found 
expression  in  the  Roman  Empire,  remained  only  as  an  ideal."  How 
was  the  ideal  of  a  universal  society  kept  aUve  during  the  Middle 
Ages  ?  Why  was  the  ideal  not  lost  when  the  Holy  Catholic  Church 
ceased  to  be  a  potent  force  in  Western  Europe  ? 

2.  "The  centralization  of  Christendom  in  the  papacy,  the  tithes 
collected  by  the  church,  the  system  of  penance  which  it  imposed, 
the  pilgrimages  it  encouraged,  the  use  of  relics  by  good  Christians, 
and  the  building  of  vast  cathedrals,  all  these  contributed  something 
to  the  development  of  modern  industrialism."  Can  you  establish 
these  connections  ?     , 

3.  Show  the  part  played  in  the  development  of  modern  indus- 
trialism by  the  extreme  dignity  attached  to.  human  life,  material 
means  to  well-being,  and  manual  labor. 

4.  "Western  society  looks  toward  the  future."  Give  several 
concrete  illustrations.    Point  out  the  importance  of  this  statement. 


ANTECEDENTS  OF  MODERN  INDUSTRIALISM  5 

• 
5.  Make  a  list  of  the  social  values,  or  appraisals,  of  greatest 
importance  which  this  lesson  has  suggested  to  you.    Show  how  they 
"give  character  to  our  system,  determine  the  nature  of  its  problems, 
and  condition  their  solution." 

3.     Manorial  and  Gild  Economy 

A.  Manorial  and  gild  economy  have  for  us  a  double  importance. 
First,  they  belong  to  industrial  societies  differing  from  ours  in  tech- 
nique, in  organization,  in  class  structure,  and  in  the  nature  of  their 
problems.  The  contrast  should  help  us  to  a  better  appreciation  of 
our  problems  and  their  peculiar  dependence  upon  their  historical 
setting.  Secondly,  they  made  their  contributions  to  the  development 
of  the  industrial  society  in  which  we  live.  In  them  we  see  the  begin- 
nings of  an  agricultural  system,  a  market,  a  pecuniary  valuation,  and 
an  industrial  order.  We  note  the  tendency  of  the  last  to  expansion, 
and  the  appearance  of  incipient  industrial  classes. 

C.  I.  Compare  the  property  rights  of  the  lord  of  the  manor 
with  those  of  the  capitalist-employer  of  today.  2.  Compare  the  posi- 
tion of  the  villein  with  that  of  the  agricultural  laborer  of  today; 
with  that  of  the  industrial  laborer  of  today.  3.  What  is  meant  by 
the  "self-sufficiency"  of  the  manor?  What  has  brought  about  the 
passing  of  self-sufficient  communities?  4.  Illustrate  Biicher's  con- 
clusions upon  "itinerancy"  and  "home-work"  with  American  ex- 
amples. 5.  What  gild  practices  seem  to  you  most  peculiar?  6.  What 
part  was  played  by  the  gild  in  industrial  development  ?  7.  Show  the 
transitional  nature  of  the  preamble  of  the  gild  of  the  tailors  at  Exeter. 

D.  I.  "The  manorial  system  was  an  aggregation  of  like  units; 
modern  industrialism  is  an  integration  of  a  multitude  of  unlike  units 
into  a  vast  and  intricate  system."  Illustrate.  This  difference  in 
organization  is  responsible  for  what  differences  in  the  nature  of  the 
problems  confronting  the  two  societies  ? 

2.  Why  were  financial  panics,  commercial  crises,  and  industrial 
depressions  unknown  in  mediaeval  Europe?  What  was  the  nature 
of  economic  disasters  which  mediaeval  peoples  had  to  fear  ? 

3.  "The  relation  of  mediaeval  lord  and  man  was  a  matter  of 
status;  that  of  modern  employer  and  employee  is  an  affair  of  con- 
tract." Compare  the  advantages  and  disadvantages  of  the  positions 
of  the  mediaeval  and  the  modern  proletarian.  Did  the  serf  or  villein 
own  any  equities  in  the  property  with  which  he  worked  ?  Compare 
the  problems  of  economic  insecurity  in  the  two  systems. 

4.  "The  production  of  an  agricultural  surplus  is  a  necessary 
prerequisite  to  a  differentiated  industrial  system."  "The  size  of  the 
agricultural  surplus  fixes  the  limit  of  urban  growth."    On  the  basis 


6  CURRENT  ECONOMIC  PROBLEMS 

• 

of  these  and  like  statements  write  an  essay  upon  the  part  played  by 
the  agricultural  surplus  in  the  development  of  modern  industrialism. 

5.  What  advantages  in  industrial  efficiency  had  the  mediaeval 
system  of  serfdom  over  the  Roman  system  of  slavery  ?  Did  serfdom 
make  any  positive  contribution  to  the  agricultural  surplus  ? 

6.  "The  monaster}^,  an  aggregation  of  mature  males,  possessed 
no  purely  consumptive  class.  Labor  was  evoked  for  the  sake  of 
discipline.  In  course  of  time  the  monks  became  very  fond  of  the 
good  things  of  life."  With  these  sentences  as  a  basis,  show  how  the 
monastery  contributed  to  the  production  of  an  agricultural  surplus 
and  the  beginnings  of  a  commercial  system. 

7.  "The  essential  difference  between  the  village  and  the  town  is 
that  the  village  is  a  collection  of  homogeneous  units,  while  the  town 
is  a  collection  of  heterogeneous  units  differentiated  and  integrated." 
Translate  and  illustrate. 

8.  Compare  the  market  for  which  goods  were  produced  by  the 
gildsmen  with  that  which  modern  entrepreneurs  have  to  consider. 
What  differences  do  you  note  in  the  two  "business"  problems 
involved  ? 

9.  "To  use  modern  terms,  which  were  meaningless  then,  the 
gildsman  was  at  once  employer  and  workman,  capitalist  and  laborer." 
Compare  the  "labor  problems  "  of  gild  and  modern  industrial  economy. 
Could  labor  unions  have  grown  up  in  the  mediaeval  town?  Could 
socialism  have  arisen  ?    syndicalism  ? 

10.  What  contribution  did  gild  economy  make  to  a  development 
of  each  of  the  following :  the  market  ?  the  pecuniary  system  ?  the 
enlargement  of  the  industrial  community  ?  modern  industrial  organi- 
zation ?    modern  technique  ?    modern  industrial  classes  ? 


■) 


4.     Mediaeval  Commerce 


A.  Through  commerce  the  aggregation  of  small  and  self-sufficient 
communities,  which  were  the  mediaeval  world,  has  given  place  to  the 
complex  system  of  interdependent  groups,  which  we  call  modern  indus- 
trialism. The  new  organization  has  tended,  not  only  to  the  creation 
of  a  universal  industrial  system,  but  to  a  world-wide  society  and  a 
cosmopolitan  culture  as  well.  It  has  left  its  imprint  upon  all  our 
institutions,  poHtical,  economic,  ethical,  religious,  and  social.  It  has 
translated  all  our  problems  into  terms  of  the  larger  social  group. 
It  has  made  the  fact  of  interdependence  of  paramount  importance 
in  the  consideration  of  our  social  arrangements. 

C.  I.  Why  are  no  readings  given  in  the  Problems  recording  actual 
mediaeval  exchanges?  2.  In  what  respects  do  the  histories  of  com- 
merce with  which  you  are  acquainted  fail  to  meet  Forrest's  definition  ? 


ANTECEDENTS  OF  MODERN  INDUSTRIALISM  7 

3.  Connect  the  attitude  of  the  early  church  toward  commerce  with 
its  fundamental  concept  of  value.  4.  Did  the  commercial  activities 
of  the  church  establish  permanent  commercial  relations?  5.  Did 
they  tend  to  establish  habits  of  thought  and  practices  favorable  to 
commercial  development  ?  6.  Is  there  any  evidence  in  the  selection 
from  Macaulay  that  some  of  our  problems  are  not  as  new  as  we  think  ? 
D.  I.  "The  history  of  commerce  is  the  history  of  social  and 
industrial  development."  Explain  the  parts  played  by  economic 
differentiation  and  integration  in  this  development. 

2.  ''The  idea  that  value  is  a  physical  property  of  an  object,  if 
rigidly  adhered  to,  would  have  prevented  the  development  of  medi- 
aeval commerce  and  the  larger  social  system."  Show  some  of  the 
social  values  derived  from  this  idea  which  tended  to  prevent  industrial 
development. 

3.  Make  a  list  of  the  social  values  of  the  Middle  Ages  which  were 
favorable  to  the  development  of  commerce. 

4.  "As  an  active  instrument  in  the  realization  of  a  uni\^ersal 
society  commerce  deserves  to  rank  as  the  legitimate  successor  of  the 
mediaeval  church."  How  can  commerce  be  thought  of  as  the  suc- 
cessor of  the  church  ?    Is  this  statement  too  strong  ? 

5.  Show  the  dependence  of  commercial  success  upon  standardized 
and  predictable  conditions.  What  part  has  commerce  played  in  an 
enlargement  of  the  political  unit  ?  in  suppressing  local  disorder  ?  in 
rendering  social  arrangements  more  certain  ?  in  standardizing  legal 
codes  ?    in  preventing  war  ? 

6.  Review  the  list  of  current  problems  which  you  drew  up  in  the 
first  exercise  in  this  course.  What  problems  in  your  list  would  not 
be  present  but  for  the  commercial  development  of  the  last  few  cen- 
turies? What  problems  would  be  present  but  of  quite  different 
characteristics  ?  What  problems  have  been  unaffected  by  the 
developing  interdependence  in  social  life  ? 

5.     Mediaeval  Industrial  Policy 

A.  At  many  points  mediaeval  policy  is  strikingly  in  contrast 
to  that  of  modern  industry.  A  spirit  of  group  solidarity,  a  distrust  of 
individual  initiative,  a  high  regard  for  the  interests  of  the  consumer, 
the  personaUty  of  business  relations,  and  the  minute  regulation  of 
industrial  activity  seem  alike  quite  strange  to  us.  However,  at  present 
we  are  attempting  to  reclaim  some  of  this  ground  which  extreme 
individualism  gave  up  and  to  re-create  some  of  the  values  of  the  gild 
system.  Yet  the  gild  system  was  no  industrial  Utopia.  It  may  per- 
chance be,  if  all  the  facts  were  known,  that  our  standards  of  business 
ethics  are  well  in  advance  of  those  of  this  idyllic  period. 


8  CURRENT  ECONOMIC  PROBLEMS 

C.  I.  Does  the  evidence  presented  in  4-7,  13,  and  14  bear  out 
the  conclusions  stated  in  12  ?  2.  In  the  mediaeval  town  was  honesty 
the  best  policy  ?  Did  the  gildsmen  think  so  ?  3.  Classify  the  tricks 
of  trade  mentioned  in  14  and  15,  and  state  as  many  modern  parallels 
as  you  can.  4.  Contrast  in  as  many  respects  as  you  can  gild  ideals 
and  gild  practices.  5.  What  fundamental  principles  underlie  the 
policies  mentioned  in  the  readings  ? 

D.  I.  From  the  evidence  which  you  have  gathered  would  you 
say  that  mediaeval  men  acted  from  motives  different  from  those 
which  actuate  men  today  ? 

2.  What  evidences  of  the  existence  of  a  spirit  of  solidarity  among 
modern  industrial  groups  can  you  discover?  Is  it  like  that  in 
mediaeval  society  ? 

3.  "The  gild  period  was  the  golden  age  in  industrial  society. 
Class  lines  were  obscure,  the  feeling  of  brotherhood  strong,  the  instinct 
of  workmanship  well  developed,  goods  were  sold  at  reasonable  prices, 
and  the  general  code  of  business  ethics  was  high."  "A  contrast  of 
the  ideals  and  practices  of  the  gild  period  show  the  former  to  be 
sheer  hypocrisy."  What  evidence  lies  back  of  each  of  these  general- 
izations ?  What  is  overlooked  in  each  ?  Were  the  ideals  sheer  hypoc- 
risy ?    Of  what  value  were  they  ? 

4.  "The  whole  body  of  municipal  market  law  can  be  reduced  to 
two  principles:  first,  sales  must  be  public  and  at  first  hand;  second, 
everything  possible  shall  be  produced  in  the  town."  Do  you  accept 
this  statement? 

5.  State  any  lingering  survivals  of  mediaeval  practices  which 
have  conje  under  your  observation. 

6.  "The  present  tendency  is  back  toward  authoritative  regulation 
of  industry,  toward  consciously  and  deliberately  making  industrial 
activity  conform  to  ideals  which  society  sets  up."  Cite  evidence  in 
support  of  this  statement.  Of  what  value  is  mediaeval  experience 
in  solving  the  problems  of  social  control  with  which  we  are  now 
confronted  ? 

6.     Mediaeval  Economic  Theory 

A.  Mediaeval  life  and  thought  find  accurate  representation  in  an 
economic  theory  whose  early  expression  is  ethical  and  dominated  by 
an  ideal  of  justice.  This  finds  expression  alike  in  the  doctrine  of 
stewardship,  the  theory  of  just  price,  the  low  value  set  upon  com- 
merce, and  the  prohibition  of  usury.  The  last  two  of  these,  despite 
the  magical  instruments  of  social  control  which  were  used  to  secure 
conformity  to  them,  were  gradually,  but  radically,  modified  in  the 
face  of  rising  industrial  culture.    The  first  two,  temporarily  eclipsed, 


ANTECEDENTS  OF  MODERN  INDUSTRIALISM  9 

have  re-emerged  in  the  very  recent  proposals  for  authoritatively 
regulating  industry  and  fixing  wages.  Mercantilism  is  an  expression 
of  a  people  attaining  nationalism  and  engaged  in  colonial  exploitation. 

B.  75,  76,  78,   140,   143,   145,   148,   200,  223,  321.  ^ 

C.  I.  In  what  terms  would  the  modern  sociologist  express 
Aquinas'  doctrine  of  stewardship?  2.  What  agencies  of  the  control 
of  industry  are  revealed  in  17  and  18  ?  Haye  they  modern  parallels  ? 
3.  In  terms  of  the  "theoretical  tendencies"  mentioned  by  Ingram, 
what  thought  today  is  mercantilistic  ?  4.  Do  you  agree  with  Ingram's 
estimate  of  the  contribution  of  mercantilism  to  industrial  de- 
velopment ? 

D.  I.  Can  the  early  theories  of  commerce,  price,  and  usury  be 
explained  in  terms  of  contemporary  industrial  needs  ? 

2.  "The  mediaevalist  meant  by  a  just  price  the  customary  price." 
Show  that  a  theory  of  just  price  assumes  a  static  society.  By  what 
ultimate  standards  did  the  mediaevalist  attempt  to  determine  the 
equity  of  a  particular  price  ?    Were  they  satisfactory  ? 

3.  Bring  to  the  cfkss  any  arguments,  discussions,  or  proposals  that 
you  have  been  able  to  find  which  have  underlying  them  the  doctrine 
of  stewardship. 

4.  What  large  group  of  agencies  of  social  control  are  suggested 
by  these  readings?  Mention  agencies  of  these  types  which  are  in 
use  today.    Do  you  regard  them  as  important  ? 

5.  Give  an  account  of  the  economic,  religious,  political,  intel- 
lectual, and  social  conditions  under  which  the  theory  of  mercantilism 
arose. 

6.  "To  understand  mercantilism  aright,  we  must  note  the  policy 
which  it  displaced,  and  which,  at  its  inception,  was  its  antithesis. 
This  was  not  economic  internationalism,  as  so  many  writers  seem 
to  think,  but  economic  localism."  If  this  was  true,  what  light  does 
it  throw  upon  mercantilism  as  a  factor  in  industrial  development? 
Is  it  true? 

7.  What  relation  is  there  between  the  dominance  of  mercantilism 
in  English  political  thought  and  the  American  Revolution  ? 

8.  Make  a  careful  comparison  of  mercantilist  thought  and  its 
modern  parallels. 

9.  "A  policy  of  national  restriction,  such  as  mercantilism,  could 
not  live  in  opposition  to  the  larger  commercial  society  which  it  was 
one  of  the  most  important  factors  in  creating."  Why?  Does  this 
mean  that  mercantilism  wrought  its  own  destruction? 


II.    THE  INDUSTRIAL  REVOLUTION 
7.    The  Antecedents  of  the  Revolution 

A.  A  comprehensive  presentation  of  the  antecedents  of  the 
Industrial  Revolution  is  impossible.  Every  aspect  of  life — ethical, 
religious,  political,  industrial,  intellectual,  and  philosophical — made 
its  contribution  to  the  movement.  The  march  of  events — the  Renais- 
sance, the  great  discoveries,  the  Reformation,  the  rise  of  nationality, 
the  settlement  of  America — all  of  these  had  their  part  in  determining 
its  coming.  Racial  and  geographic  conditions  caused  it  to  appear 
first  in  England.  In  lieu  of  the  complete  story  the  readings  presented 
suggest  only  a  few  of  its  many  antecedents.  They  should,  however, 
serve  to  reveal  the  movement  as  a  slowly  developing  one  compre- 
hending all  the  threads  which  together  make  up*social  life. 

C.  I.  Do  you  accept  Marshall's  statement  of  the  contribution 
of  the  law  of  primogeniture  to  the  Industrial  Revolution?  2.  Com- 
pare the  industrial  conditions  on  the  eve  of  the  revolution  with  those 
of  manorial  economy;  those  of  gild  economy.  3.  Was  the  laborer's 
position  then  better  or  worse  than  it  is  now  ?  4.  Is  there  any  con- 
nection between  "Spanish  Gold"  and  the  steam  engine?  5.  Why 
did  not  the  revolution  come  a  century  earlier  ? 

D.  I.  Why  had  so  few  improvements  in  technique  been  made 
from  the  fifth  to  the  eighteenth  century  ? 

2.  Give  illustrations  from  Toynbee,  or  elsewhere,  of  each  of  the 
following  characteristics  of  industrial  life  before  the  revolution:  the 
short  time  of  the  productive  process ;  the  limited  extent  of  the  market ; 
the  personal  character  of  industrial  relations. 

3.  "It  is  only  when  a  people  meet  a  crisis  that  they  are  ready  to 
depart  from  their  customary  ways  of  doing  things  and  to  formulate 
new  habits."  Show  how  the  opening  of  the  New  World  brought 
England  face  to  face  with  such  a  crisis.  Show  how,  in  the  face  of 
this  crisis,  the  customary  system  was  bound  to  go. 

4.  "The  settlement  of  America  was  in  no  little  measure  responsible 
for  the  great  inventions  which  characterized  the  Industrial  Revolu- 
tion." What  influence  had  the  settlement  of  America  upon  the 
extent  of  the  market?  the  size  of  the  factory?  specialization  in 
production  ?  the  division  of  labor  ?  the  capitalistic  organization  of 
industry  ?    the  display  of  inventive  genius  ? 

5.  Why  did  the  Declaration  of  Independence,  the  French  Revolu- 
tion, Adam  Smith's  Wealth  of  Nations,  the  great  mechanical  inven- 

10 


THE  INDUSTRIAL  REVOLUTION  1 1 

tions,  and  Goldsmith's  Deserted  Village  appear  within  a  few  years  of  , 
each  other  ? 

6.  "The  Industrial  Revolution  is  to  be  explained  very  largely  in 
terms  of  the  changed  ratio  of  industrial  resources  to  population 
effected  by  the  settlement  of  America."  By  clear-cut  illustrations 
show  the  importance  of  this  ratio.  Give  the  argument  which  leads 
to  the  conclusion  stated  above.    Do  you  accept  it? 

8.    The  Nature  and  Scope  of  the  Revolution 

A.  Gradual  as  was  its  course,  the  industrial  movement  which 
we  are  stud3dng  wrought  a  general  revolution  in  social  life  and  values. 
The  technique  which  it  established  proceeded  from  new  and  radically 
different  principles.  The  organization  which  it  effected  was  marked 
by  a  new  and  radically  different  distribution  of  industrial  functions. 
It  placed  the  welfare  of  all  classes  upon  a  pecuniary  basis.  It  resolved 
society  anew  into  social  strata.  Finally,  in  myriad  ways,  in  the  indus- 
trial, •political,  ethical,  religious,  and  intellectual  aspects  of  life,  it 
created  new  standards,  established  new  institutions,  and  raised  new 
problems. 

C.  I.  When  did  the  Industrial  Revolution  begin?  end?  2. 
What  factors  do  you  regard  as  of  greatest  importance  in  the  develop- 
ment of  the  new  technique?  3.  Illustrate  from  your  own  observa- 
tion the  slow  subjugation  of  the  industrial  system  by  the  machine 
technique.  4.  Into  what  further  industries  and  occupations  do  you 
expect  to  see  the  machine  system  extended?  5.  Show,  by  a  presen- 
tation of  the  facts  in  the  light  of  the  proper  economic  principles,  how 
England  came  to  face  the  alternative  of  cheap  food  or  a  lower  margin 
of  cultivation  and  higher  rents.  6.  Was  the  capitalist  a  product  of 
the  revolution ?  the  " wage-slave "  ?  capitalism?  7.  By  giving  con- 
crete illustrations,  show  how  many  and  what  aspects  of  life  were 
affected  by  the  revolution. 

D.  I.  "The  economic  discovery  of  America  made  the  craft 
technique  inadequate."    Explain. 

2.  Point  out  the  problems  involved  in  the  creation  of  the  machine 
technique  and  the  application  of  mechanical  power,  state  the  facts 
and  principles  which  were  necessary  to  a  solution  of  these  problems, 
and  show  how  these  were  supplied  by  the  scientific  work  of  the 
seventeenth  and  eighteenth  centuries. 

3.  "The  revolution  may  be  described  in  terms  of  three  essential 
changes:  the  productive  process  has  been  lengthened,  the  market 
has  been  enlarged,  and  industrial  relations  have  become  impersonal." 
What  problems  are  associated  with  each  of  these  three  changes  ? 
What  essential  changes  have  been  omitted  from  the  above  list  ? 


12  CURRENT  ECONOMIC  PROBLEMS 

4.  "Modern  civilization  rests  upon  coal  and  iron."  What  im- 
portant changes  in  the  localization  of  industries  have  come  about 
because  of  the  dependence  of  the  new  technique  upon  these  minerals  ? 
What  part  have  they  played  in  the  growth  or  decline  of  nations  in 
the  nineteenth  century  ?  Can  England  hope  to  remain  ''  the  workshop 
of  the  world"? 

5.  "Productive  industry  is  dependent  upon  science.  Physics, 
chemistry,  metallurgy,  geolog>^,  and  biology  contribute  to  the  estab- 
lishment and  extension  of  our  industries."  Illustrate  the  relation 
of  scientific  "progress"  and  industrial  development.  What  nation 
furnishes  today  the  best  example  of  the  interdependence  of 
the  two? 

6.  In  a  discussion  of  the  revolution  why  is  so  much  attention 
given  to  the  development  of  the  means  of  communication  and 
transportation  ? 

7.  "Many  of  our  legal,  political,  and  religious  institutions  are 
much  more  consonant  with  the  spinning-wheel  than  with  the  electric 
dynamo."  What  have  spinning-wheels  or  dynamos  to  do  with 'legal, 
political,  or  religious  institutions  ? 

9.     Labor  and  the  Revolution 

A.  No  aspect  of  the  revolution  has  received  so  much  attention 
as  the  rise  of  the  "industrial  proletariat."  Accordingly  it  seems  well 
to  emphasize  this  phase  of  the  great  transformation  of  society  by 
presenting  two  conflicting  views  as  to  what  it  has  meant  for  labor. 
The  questions  raised  will  appear  time  and  again  in  our  later  study. 

B.  118,  254,  283,  355,  366H39. 

C.  I.  Compare  the  viewpoints  underlying  the  two  readings. 
2.  State  the  two  conclusions  as  to  the  influence  of  the  Industrial 
Revolution  upon  the  welfare  of  the  industrial  laborer.  3.  What  are 
the  questions  at  issue  ? 

D.  I.  Connect  the  Industrial  Revolution  with  the  rise  of  the 
"Fourth  Estate." 

2.  Did  the  revolution  increase,  or  decrease,  the  importance  of 
contract?  What  had  this  to  do  with  the  welfare  of  the 
workers  ? 

3.  Is  a  machine  an  instrument  of  production  which  tends  to 
displace  the  laborer,  or  is  it  a  device  which  increases  his  productive 
efficiency  ? 

4.  What  has  been  the  effect  of  the  machine  technique  upon  the 
standard  of  material  comfort  enjoyed  by  the  laborer?  Will  the 
further  extension  of  the  machine  technique  produce  like  effects  ? 


THE  INDUSTRIAL  REVOLUTION  13 

10.    The  New  Industrialism 

A.  The  new  industrialism  has  its  technical  basis  in  the  closely 
related  capitalistic  method  of  production,  machine  process,  and  fac- 
tory system.  Its  business  basis  is  to  be  found  in  the  institutions  of 
the  market,  pecuniary  valuation,  and  corporate  organization,  which 
are  discussed  elsewhere.  Upon  this  foundation  there  has  been  created, 
not  only  a  new  industrial  system,  but  a  new  economic  culture.  The 
modern  problems  of  the  home  and  the  rise  of  the  "  economics  of  femin- 
ism" furnish  a  single  example  of  the  cultural  changes  which  the  new 
industrialism  is  effecting  and  the  problems  to  which  it  is  giving  rise. 

B.  68,70,90,95,96,97,262. 

C.  I.  Is  Forrest  correct  in  his  contention  that  capital  causes  a 
large  amount  of  modern  wealth  to  be  socialized  ?  2.  By  reference  to 
some  establishment  with  which  you  are  familiar  explain  concretely 
Biicher's  definition  of  the  factory  system.  3.  Of  what  practical  im- 
portance is  the  view  of  the  machine  process  expressed  by  Veblen? 
4.  With  what  statements  or  conclusions  of  Davenport's  do  you  agree  ? 
With  what  do  you  take  issue  ? 

D.  I.  Is  Forrest  arguing  implicitly  for  an  industrial  aristocracy  ? 
a  plutocracy  ? 

2.  "The  individual  is  compelled  to  serve  society  by  turijing  back 
into  the  productive  processes  much  of  the  profit  derived  from  invested 
capital."  What  does  this  mean?  Assuming  it  to  be  true,  of  what 
value  is  it  to  the  legislator  considering  the  minimum  wage,  the  income 
tax,  the  protective  tariff,  or  some  similar  proposal  ? 

3.  What  differences  do  you  note  between  country  and  city 
laborers?  The  possession  of  what  characteristics  makes  a  good 
laborer  under  the  domestic  system  ?    under  the  factory  system  ? 

4.  *'By  virtue  of  this  concatenation  of  processes  the  modern 
industrial  system  at  large  bears  the  character  of  a  comprehensively 
balanced  mechanical  process"  (Veblen).     Translate  and  illustrate. 

5.  Show,  by  examples,  how  the  machine  process  has  affected  our 
daily  habits,  our  ways  of  thought,  and  our  attitudes  on  public  ques- 
tions. Cite  evidence  of  the  use  of  the  machine  process  in  religious 
and  educational  work. 

6.  Enumerate  as  many  religious,  ethical,  political,  and  social  prob- 
lems as  you  can  which  have  been  affected  by  the  Industrial  Revolution. 

II.    The  Extension  of  IndustriaUsm 

A.  The  Industrial  Revolution  is  still  in  process.  Industries  old 
to  the  machine  process  are  using  more  and  more  complicated  devices. 
Industries  new%to  it  are  feeling  its  transforming  touch.  The  changes 
which  it  is  destined  to  effect  in  our  social  arrangements  have,  perhaps, 


14         CURRENT  ECONOMIC  PROBLEMS 

only  begun  to  make  themselves  manifest.  Quite  as  important 
is  the  generally  neglected  extension  of  the  industrial  system.  The 
competition  of  industrial  and  non-industrial  culture,  the  victories  of 
the  former,  the  ever-expanding  area  of  the  modern  industrial  system, 
and  the  reactions  of  this  contact  upon  the  system  are  of  great  current 
importance  and  fraught  with  grave  future  meaning. 

C.  I.  Mention  the  various  aspects  of  Western  and  of  primitive 
culture  which  are  coming  into  conflict  along  the  "margin  of  civiliza- 
tion." In  each  case  what  is  the  result?  2.  Compare  in  detail  the 
industrial  system  of  the  West  and  that  which  is  being  established  in 
the  East.  3.  Of  what  utility  is  Johnson's  distinction  between  "capital 
proper"  and  "exploitative  capital"?  4.  Do  you  accept  the  argu- 
ment connecting  exploitative  capital  with  war  ?  5.  State,  as  definitely 
as  you  can,  the  effects  upon  Western  industrial  culture  of  its  economic 
conquest  of  primitive  cultures. 

D.  I.  Can  you  associate  exploitative  commerce  with  the  Colo- 
nial wars  of  the  seventeenth  and  eighteenth  centuries  ? 

2.  A  capitalist  invests  $100,000  in  a  mine,  uncertain  as  to  whether 
he  will  get  anything  in  return  or  not.  At  the  end  of  three  years  he  is 
making  $50,000  per  year  net,  or  50  per  cent  on  his  investment.  It 
appears  certain  that  this  rate  will  continue  indefinitely.  The  ordinary 
rate  of  return  from  investments  equally  safe  is  5  per  cent.  Will  the 
value  of  the  property  remain  $100,000?  Will  the  investor  have  to 
continue  owning  the  property  to  get  the  future  returns  upon  his 
lucky  investment?  What  may  he  be  expected  to  do?  If  he  sells, 
what  rate  of  return  will  the  purchaser  make  on  his  investment? 
What  general  conclusions  are  suggested  by  these  questions  ? 

3.  Why  has  America  in  the  past  been  exporting  so  little  capital? 
Why  are  we  now  beginning  to  export  capital?  What  political  or 
economic  import  do  you  attach  to  the  change  ? 

4.  "The  relation  of  the  industrial  and  non-industrial  parts  of 
the  world  may  be  thought  of  as  an  area  wherein  uniform  prices  tend 
to  prevail,  surrounded  by  areas  which  have  prices  radically  different." 
Trade  between  parts  of  the  same  area  can  yield  profits  how  large? 
between  different  areas?  Why  in  the  latter  case  is  monopoly  so 
essential  to  the  traders  ?  What  relation  has  the  state  to  the  mainte- 
nance of  such  monopolies  ?  Cite  historical  examples.  Of  what  con- 
sequence are  these  things  in  international  affairs  ? 

5.  What,  in  your  opinion,  is  the  relation  of. the  extension  of 
industrialism  to  nationalism  ? 

6.  Is  modern  industrial  culture  superior  to  that  of  the  native 
culture  which  it  displaces  ?  What  makes  you  think  so  ?  What  are 
the  standards  by  which  you  pronounce  one  culture  superior  to  another  ? 

7.  Will  the  world  eventually  constitute  a  single  industrial  com- 
munity ? 


III.     SOCIAL  CONTROL  IN  MODERN  INDUSTRIALISM 
12.    The  Nature  of  Progress 

A.  The  ultimate  object  of  our  study,  it  must  not  be  forgotten, 
is  the  formulation  of  an  economic  program.  But  a  program  implies 
an  end  to  be  attained.    We  must  accordingly,  though  not  necessarily 

/  in  this  lesson,  or  even  in  this  course,  eventually  decide  upon  that  end. 
The  making  of  such  a  decision  implies  a  clear  distinction  between 
development  and  progress,  and  the  formulation  of  a  working  concept 
of  the  latter. 

B.  26,  27,  254,  355,  361,  362,  382. 

C.  I.  Enumerate  the  scspects  of  human  culture.  Do  they  all 
move ''forward  "together?  What  do  you  mean  by  forward  ?  2.  What 
is  the  common  denominator  of  change  in  these  various  aspects 
of  life  ?  3.  Is  a  scientific  definition  of  progress  possible  ?  4.  What  is 
the  practical  importance  of  the  distinction  between  evolution  and 
progress?  5.  In  formulating  your  concept  of  progress  what  weight 
would  you  attach  to  the  various  criteria  mentioned  by  Bryce  ?  What 
important  criteria  do  A  he  omit  ? 

D.  I.  Can  society  determine  what  it  is  to  be  ? 

2.  Is  civilization  an  advance  over  barbarism?  Is  our  culture 
superior  to  that  of  the  Middle  Ages  ?  Are  England's  social  arrange- 
ments superior  to  Italy's  ?    to  China's  ?    How  do  you  know  ? 

3.  ''To  argue  against  conscious  control  of  industrial  activity  on 
the  ground  that,  without  it,  the  fittest  survive,  is  to  argue  in  a  circle." 
Give  the  argument  supporting  the  above  conclusion. 

4.  Is  there  a  confusion  between  evolution  and  progress  in  any  of 
the  following  quotations  ? 

God's  in  his  heaven, 
Airs  right  with  the  world. 

Yet,  I  doubt  not,  through  the  ages  one 
increasing  purpose  runs. 

One  life,  one  law,  one  element, 

And  one  far  off,  divine  event, 

To  which  the  whole  creation  moves. 

I  don't  know  where  I'm  going. 
But  I'm  on  my  way. 

15 


i6  CURRENT  ECONOMIC  PROBLEMS 

5.  "The  greatest  discovery  of  the  nineteenth  century  is  that  we 
are  on  our  way."    What  makes  you  think  so  ? 

6.  "  The  masses  have  never  made  any  contribution  to  the  develop- 
ment of  civiUzation.  All  progress  has  been  the  result  of  the  efforts 
of  a  very  small  and  select  group."  What  social  ideal  is  implicit  in' 
this  quotation  ?  Do  you  know  of  any  society  which  has  consciously 
acted  upon  it  ?  What  scheme  of  the  distribution  of  wealth  does  it 
suggest  ?    Should  we  accept  this  ideal  ? 

7.  "Social  progress  consists  in  a  bettering  of  the  material  condi- 
tions of  the  masses."    Answer  the  questions  asked  under  6. 

8.  "If  we  are  to  have  progress,  the  productive  equipment  of 
society  must  be  increased.  Capital  must  be  accumulated  in  increasing 
amounts."  Compare  the  ideal  implicit  in  this  and  the  two  preceding 
quotations.  What  social  arrangements  favor  the  accumulation  of 
capital  ?  Is  the  end  of  such  a  program  the  good  of  the  [ew  or  of  the 
many  ? 

9.  Would  you  rather  live  beneath  God's  blue  sky  or  capitalistic 
smoke  ?  Has  this  antithesis  any  bearing  upon  the  problems  of  immi- 
gration and  the  tariff  ? 

13.    The  Control  of  Economic  Activity 

A.  If  we  are  some  time  or  other  to  formulate  an  economic 
program,  we  must  learn  what  the  agencies  of  social  control  are,  how 
they  act,  and  how  they  can  be  manipulated.  We  must  .come  to 
appreciate  the  vast  and  complex  system  of  instruments  which  society 
has  slowly  fashioned,  and  which  may  be  used  singly  or  in  infinite 
combinations.  If  their  bewildering  nature  makes  understanding  hard 
and  manipulation  difficult,  it  but  evidences  the  multifarious  and  deli- 
cate work  which  they  can  be  made  to  perform.  It  is  the  object  of  this 
assignment  to  make  a  beginning  of  an  understanding  of  this  system. 

B.  15,  67,  70,  319,  327,  380. 

C.  I.  What  agencies  of  control  can  be  used  to  secure  quick 
mechanical  changes  ?  Illustrate.  2.  What  agencies  to  secure  gradual 
and  organic  adaptations  ?  Illustrate.  3.  What  agencies  can  be  used 
directly  to  secure  the  object  aimed  at  ?  4.  What  agencies  effect  their 
objects  quite  indirectly  ?  5.  What  agencies  mentioned  in  the  readings 
are  most  often  overlooked  in  programs  of  control  ?  6.  Illustrate,  by 
citing  concrete  cases,  the  dangers  of  overlooking  important  agencies 
of  control. 

D.  I.  "A  distinction  between  evolution  and  progress  leads 
inevitably  to  the  elaboration  of  a  program  of  social  control."    Why  ? 

2.  "Because  of  the  multiphcity,  variety,  and  efficiency  of  the 
agencies  of  control  which  we  possess — despite  the  gravity  of  our 


SOCIAL  CONTROL  IN  MODERN  INDUSTRIALISM         17 

ignorance— we  could  not  escape  social  control  if  we  would."    Show 
why  quite  definitely. 

3.  Compare  the  problem  and  agencies  of  social  control  of  the  gild 
period  with  that  of  modern  industrialism. 

4.  Show,  by  illustration,  how  each  of  the  following  has  served 
as  an  agency  of  social  control :  the  miracle  plays,  auricular  confession, 
the  worship  of  saints,  symboHsm,  romantic  literature,  Cartesian 
philosophy,  the  elective  system,  the  high  social  value  set  on  thrift, 
the  union  label,  vested  interests. 

5.  Why  have  theories  of  social  control  been  expressed  so  largely 
in  the  past  in  terms  of  state  activity  ? 

6.  Which  are  the  more  efficient  agencies  of  social  control,  the 
slowly  developing  institutions,  such  as  family  life,  education,  and 
ethical  systems,  or  those  promising  immediate  results,  such  as  legis- 
lation, revolution,  and  the  like  ?  > 

14.    The  Statement  of  the  Laissez-faire  Theory 

A.  For  our  immediate  purpose  the  most  important  aspect  of 
the  problem  of  social  control  is  that  of  the  relation  of  the  state  to 
industry.  The  theory  which  dominated  legislation  during  the  nine- 
teenth century  was  laissez-faire.  This  theory  is  still  quite  potent. 
Its  dominant  note — that  of  limitation  of  the  powers  of  government — 
presents  a  problem  which  will  always  be  with  us.  In  view  of  our  larger 
problem  we  must  form  some  notion  of  what  laissez-faire  was — and  is. 
.  B.     61,  135,  318,  332,  357. 

C.  I .  In  what  readings  do  you  find  an  implied  antithesis  between 
nature  a^d  the  state  ?  Is  this  antithesis  necessary  to  the  laissez-faire 
theory?  2.  Compare  the  views  of  Blackstone  and  Ravenstone; 
Rousseau  and  Godwin;  Smith  and  Bentham.  3.  What  fundamental 
assumptions  underlie  the  theory  of  laissez-faire?  4.  What  has 
Ingalls's  Opportunity  in  common  with  the  laissez-faire  theory  ? 

D.  I.  Strip  Adam  Smith's  argument  against  governmental 
restraints  of  its  concrete  matter  and  restate  it  in  terms  of  the  general 
relationship  of  industry  and  the  state. 

2.  "The  philosophical  basis  of  laissez-faire  is  the  fact  that  we 
cannot  tell  before  the  event  who  is  wise  and  who  is  foolish."  If  this 
is  true,  under  what  conditions  would  you  expect  laissez-faire  to  become 
the  dominant  philosophy  ? 

3.  Is  there  any  connection  between  the  appearance  of  so-called 
self-made  men  and  a  belief  that  in  the  industrial  game  the  state 
should  keep  hands  off  ? 

4.  How  can  the  state  justify  itself  in  taxing  the  bachelor  for  the- 
support  of  the  public  schools  ?    Is  this  laissez-faire  ? 


i8         CURRENT  ECONOMIC  PROBLEMS 

5.  Why  did  laissez-fairi  come  with  the  settlement  of  America 
and  the  extension  of  the  machine  process  ? 

15.    The  Interpretation  of  Laissez-faire 

A.  To  prove  or  disprove  laissez-faire  is  a  simple  matter.  To 
analyze  it,  determine  its  elements,  and  understand  them  is  a  difl5cult 
task.  In  content  and  form  the  theory  seems  unintelligible  except 
against  the  background  of  the  rapidly  ex-pan  ding  machine  culture 
which  produced  it.  Its  negative  statement  has  served  as  a  mask  for 
the  many  positive  features  with  which  it  is  clothed;  for  it  insists  as 
strenuously  upon  authoritative  guidance  and  interference  at  certain 
points  in  our  arrangements  as  it  opposes  them  at  others.  The  ques- 
tion of  its  validity  becomes,  accordingly,  not  one  of  the  general 
theory,  but  of  the  concrete  proposals  which  make  it  up. 

B.  40,  57. 

C.  I.  Do  you  accept  the  "principle  of  utility"  ?  2.  What  is  its 
relation  to  the  theory  of  laissez-faire  ?  3 .  Wherein  do  you  differ  from 
MiU  in  his  opposition  to  government  interference  ?  in  his  statement 
of  the  province  of  government  ?  4.  What  is  the  place  of  authority 
in  the  theory  of  laissez-faire?  5.  Does  Cairnes  attack  the  argument 
for  laissez-faire  or  its  assumptions  ?    Does  he  prove  his  case  ? 

D.  I.  Can  there  be  a  game  without  "rules  of  the  game"  ?  Can 
there  be  such  a  thing  as  laissez-faire  ? 

2.  Why  did  not  mediaeval  Europe  evolve  a  theory  of  laissez-faire  ? 

3.  Is  there  any  connection  between  laissez-faire  and  liberalism? 
Methodism  ?  the  Declaration  of  Independence  ?  the  French  Revolu- 
tion ?  utiUtarian  ethics  ?  individualistic  philosophy  ?  the"  elective 
system?  Are  these  things  in  any  way  connected  with  the  changed 
ratio  of  population  to  resources  attending  the  settlement  of  America  ? 
the  antithesis  between  the  old  restrictive  system  and  the  new  machine 
technique  ? 

4.  "The  true  function  of  the  state  is  to  suppress  force  and  fraud." 
But  what  are  force  and  fraud  ? 

5.  Can  laissez-faire  be  laissez-faire  and  take  the  policeman,  prop- 
erty, and  the  courts  for  granted  ?  What  else  does  laissez-faire  take 
for  granted  ? 

6.  "To  the  practical  man  the  precept  'Laissez-faire^  never  meant 
'Leave  everything  alone,'  or  even  'Leave  all  natural  things  alone,' 
but  simply,  'Leave  alone  certain  things  which  I  think  ought  to  be 
left  alone'"  (Cannan).  Illustrate  by  citing  specific  evidence  of  the 
actual  relations  of  the  state  to  industry  in  the  "laissez-faire  period." 

7.  "Laissez-faire  has  been  from  the  very  first  a  theory  of  social 
welfare."    Defend  this  statement. 


SOCIAL  CONTROL  IN  MODERN  INDUSTRIALISM         19 

8.  ^'Laissez-faire  was  originally  a  cry  for  militant  reform."  What 
is  it  now  ? 

9.  "The  acceptance  of  the  idea  of  evolution  has  caused  a  restate- 
ment of  the  theory  of  laissez-faire.  Its  goal  was  once  '  the  good  of  all/ 
It  has  now  become  '  the  survival  of  the  fittest.' "  Explain  this  change 
in  detail.  Does  the  contemporary  argument  rest  upon  a  firm  logical 
basis  ? 

16.    The  Protest  against  Individualism 

A.  For  some  time  a  spirit  of  protest  has  been  rising  against  the 
extreme  individualism  which  dominated  our  institutional  develop- 
ment and  our  social  philosophy  in  the  nineteenth  century.  This  is 
due  in  part  to  the  changed  ratio  of  our  population  to  our  industrial 
equipment  and  in  part  to  the  unsatisfactory  social  conditions  whith 
have  followed  in  the  wake  of  the  machine.  It  finds  expression  alike 
in  the  appearance  of  new  problems — or  problems  new  to  us — and  in  a 
changed  attitude  toward  the  relation  of  the  state  to  industry. 

B.  74,  203,  248,  318,  355,  362,  and  pp.  xxxii-xxxviii. 

C.  I.  What  connection  is  there  between  the  machine  and  urban 
misery  and  poverty?  Is  the  connection  inevitable  or  accidental? 
2.  Why  are  we  attempting  to  explain  so  much  of  current  history  in 
terms  of  the  ''passing  of  the  frontier"?  3.  What  "new  issues" 
involve  institutional  changes  ?  changes  in  mental  attitudes  ?  mere 
extensions  of  old  policies  ?  4.  With  Brown's  statement  as  a  point  of 
departure,  make  a  list  of  the  social  and  economic  issues  with  which 
we  are  now  confronted.  5.  Is  Ingalls  or  Mr.  Dooley  right  about 
opportunity  ? 

D.  I.  Has  American  prosperity  been  due  to  our  "fundamental 
institutions,"  our  "individualistic  policies,"  and  the  "wisdom  of  our 
statesmen"?  Or  has  it  been  due  to  the  potential  resources  of  the 
country  ? 

2.  Make  a  list  of  the  "paramount  issues  "  in  American  presidential 
elections  since  the  Civil  War.  How  do  you  account  for  the  fact  that, 
generally  speaking,  none  of  these  have  been  questions  of  serious 
social  importance  ?  Why  are  so  many  social  problems  of  tremendous 
import  just  now  appearing  on  our  horizon  ? 

3.  "For  the  laborer  the  system  of  chattel  slavery  was  far  better 
than  the  current  system  of  wage  slavery.  The  future  wages  of  the 
slave  were  capitalized  into  a  current  value  that  the  slave-owner  was 
forced  to  conserve.  This  insured  care  of  the  laborer's  health  and 
strength.  Slaves  were  not  worn  out  and  scrapped,  like  old  machinery, 
as  they  are  under  the  present  system  of  free  contract."   Do  you  agree  ? 

4.  Does  the  machine  favor  the  concentration  of  wealth  ? 


20  CURRENT  ECONOMIC  PROBLEMS 

5.  "America  of  the  nineteenth  century  was  in  a  stage  of  increasing 
returns."  ''Democracy  as  yet  has  not  proved  its  case."  What  is 
the  connection  between  these  two  statements  ? 

17.    The  Theory  and  Program  of  Social  Control 

A.  In  response  to  the  changing  conditions  Just  studied  there  is 
appearing  a  new  philosophy  of  social  control.  In  antithesis  to  laissez- 
faire  it  formally  subordinates  the  interests  of  the  individual  to  those 
of  the  larger  group.  It  seeks  solutions  of  our  "new"  problems  in  pro- 
grams, differing  widely  in  spirit  and  content  from  those  of  the  nine- 
teenth century.  Its  proposals  are  gradually  becoming  more  definite, 
and  it  is  a  factor  of  increasing  importance  in  any  consideration  of 
current  economic  problems. 

B.  16,38,  74,  195,318,326,331. 

C.  I.  Compare  Green's  theory  of  individual  liberty  with  Mill's. 
2.  Make  an  application  of  Green's  theory  to  several  economic  prob- 
lems not  mentioned  by  him.  3.  On  the  basis  of  the  arguments 
advanced  by  Blease,  Hobhouse,  Adams  (74),  and  Holmes  (318),  outline 
the  case  against  the  "evolutionary  argument  for  letting  things  alone." 

4.  Show,  from  the  evidence  presented  by  Hobhouse  and  Dixon 
(195),  what  laissez-faire  tends  to  become  when  put  to  the  actual  test. 

5.  Is  Wilson's  program  comprehensive  ?  definite?  relevant?  6.  Are 
the  assumptions  underlying  Wilson's  program  those  of  Mill  or  of 
Green  ? 

D.  I.  "Social  reform  is  only  evolution  conscious  of  itself." 
With  this  as  a  text,  deliver  a  homily  against  the  biological  arguments 
for  letting  things  alone. 

2.  '^Laissez-faire  and  social  control  are  not  antithetical  proposals. 
Just  as  laissez-faire  has  a  positive  side,  so  social  control  has  a  negative 
side.    The  questions  at  issue  are  the  nature,  degree,  and  subjects  of  ^ 
control."     By  illustrations  show  the  negative  proposals  implicit  in 

'  social  control.    Show  the  importance  of  the  last  sentence. 

3.  Advocates  of  the  two  opposing  doctrines  agree  that  "the 
universe  has  been  so  contrived  that  the  interests  of  the  individual 
and  of  society  are  identical."  Show  how  the  advocates  of  laissez- 
faire  and  of  social  control  differ  as  to  which  is  to  be  left  alone,  the 
individual  or  society. 

4.  Has  liberalism  within  the  last  hundred  years  changed  its  end  ? 
its  program  ?    its  social  philosophy  ? 

5.  "The  Fourteenth  Amendment  does  not  enact  Herbert  Spen- 
cer's Social  Statics"  (Justice  Holmes).  Is  there  an  antithesis  between 
the  fundamental  presuppositions  underlying  our  institutions  and  the 
incipient  program  of  social  control  ? 


SOCIAL  CONTROL  IN  MODERN  INDUSTRIALISM         2i 

6.  "Wilson's  inaugural  address  is  based  upon  the  same  presup- 
positions as  to  the  welfare  of  society  as  lie  at  the  basis  of  orthodox 
economic  theory."    Do  you  agree  ? 

7.  Determine  quite  definitely  the  meaning  and  implications  of 
each  of  the  following,  and  outline  the  program  to  which  each  would 
lead:  (a)  "the  greatest  good  to  the  greatest  number";  (b)  "equal 
rights  to  all,  special  privileges  to  none";  (c)  "social  justice";  (d) 
"equality  of  opportunity";  (e)  "to  each  according  to  his  productive 
ability";  (/)  "from  each  according  to  his  ability,  to  each  according 
to  his  need."  Are  rights,  privileges,  goods,  opportunities,  abilities, 
and  needs  things  which  exist  in  themselves,  or  is  their  existence 
conditioned  by  the  general  situation  of  which  they  are  aspects  ? 

18.     Conservative  Factors  in  Development  of  Social  Control 

A.  But,  before  predicting  sweeping  "  social  reform,"  let  us  remem- 
ber that  our  system  has  its  conservative,  as  well  as  its  radical,  elements. 
A  constitution  that  rigidly  circumscribes  social  action,  a  strong  dis- 
trust of  "government  meddling,"  shared  by  "big"  and  "little" 
business  alike,  a  pecuniary  system  that  identifies  the  immediate 
interests  of  all  classes  with  those  of  the  entrepreneur,  and  a  tendency 
for  the  reform  movement  to  discredit  itself  by  ill-considered  action 
are  only  a  few  among  the  many  factors  checking  radical  change. 
However  radical  or  conservative  our  views,  we  must  admit  the 
importance  of  these  elements  and  give  proper  consideration  to  them 
in  any  program  of  reform. 

B.  12,  233,  289,  319,  324,  333.  ^ 

C.  I.  Are  constitutions  in  their  very  nature  conservative?  Is 
ours  more  than  others?  2.  Is  there  a  "legislative  crusade  against 
business" ?  Why  do  business  men  so  generally  think  that  there  is? 
3..  Cite  opinions  you  have  heard  similar  to  those  contained  in  61  and 
62.  4.  Connect  the  sensitiveness  and  delicacy  of  the  machine  process 
with  the  dominance  of  the  entrepreneur  viewpoint.  5.  What  factors 
in  society  oppose  the  dominance  of  this  viewpoint  ?  6.  Name  legis- 
lative enactments  and  proposals  which  run  counter  to  the  five  general 
conditions  mentioned  by  Root. 

D.  I.  "A  constitution  is  not  intended  to  embody  a  particular 
economic  theory."  Do  you  agree  ?  Does  ours  embody  a  particular 
theory  ? 

2.  "Within  the  last  hundred  years  the  aristocracy  and  the  middle 
class  have  exchanged  places  as  opponents  and  defenders  of  laissez- 
faire. '^  Explain.  Is  the  laissez-faire  of  today  the  laissez-faire  of  one 
hundred  years  ago  ? 

3.  Account  for  the  increasing  support  given  to  "state's  rights" 
by  prominent  business  men. 


21  CURRENT  ECONOMIC  PROBLEMS 

4.  ''Industrial  America  is  organized  as  a  hierarchy."  Defend 
or  attack  this  statement. 

5.  ''Exactly  the  same  interests  are  responsible  for  protection  in 
this  country  and  free  trade  in  England."  What  interests?  How 
can  they  be  furthered  by  different  poUcies  in  different  countries  ? 

6.  ''It  is  the  stability  of  conditions  imparted  by  the  conserv^atism 
of  the  l^al  system  which  makes  industrial  progress  possible."  Can 
you  construct  the  argument  leading  to  this  conclusion  ? 

7.  Is  a  stratification  of  society  on  pecuniary  lines  a  necessary 
condition  of  industrial  progress  ?    of  social  progress  ? 

19.     The  Basis  of  National  Efficiency 

A.  If  we  are  to  "get  somewhere,"  we  must  have  an  idea  of  where 
we  are  going.  If  we  are  to  formulate  an  economic  program,  it  must 
have  an  end  in  \iew.  It  must  aim  at  making  our  society  in  some 
respects  different  from  the  one  we  know  today.  Every  program 
advocated  today  has  an  ideal  society  as  its  goal.  By  way  of  illus- 
tration two  antithetical  societies  are  presented  in  this  assignment. 
Other  t>pes  will  readily  suggest  themselves  to  the  student. 

B.  221,  253,  379. 

C.  I.  Could  America  have  succeeded  with  the  German  social 
system?  2.  Could  Germany  have  succeeded  \sdth  the  American 
system  ?    3.  What  are  the  basic  differences  between  the  two  systems  ? 

D.  I.  Compare,  the  ratios  of  population  and  industrial  equip- 
ment in  America  and  in  Germany.  Wliich  factor  has  each  had  to 
conserve  ?  Can  you  argue  that  American  waste  of  resources  has  been 
a  saving  of  a  more  valuable  product,  labor  ?  Has  Germany  used  its 
labor  as  efficiently  as  America  has  ? 

2.  "The  German  system,  through  its  efficient  organization,  tends 
to  a  fuller  present  utilization  of  current  resources;  the  American 
system,  through  its  scop>e  for  individual  initiative,  tends  to  a  fuller 
utilization  by  society  of  its  capacity  for  development."  Work  out 
this  contrast  in  detail.  Which  is  the  more  valuable  national  asset,  a 
highly  organized  system  which  puts  every  man  in  his  place,  or  one 
which  allows  such  liberty  that  individuals  in  any  class  have  reasonable 
opportunities  to  develop  inventive  abiUty?  Has  a  countrv'  of  the 
first  t>T>e  surrounded  by  countries  of  the  second  tvpe  any  superlative 
advantage  over  its  neighbors? 

3.  What  conclusions  are  erroneously  drawTi  from  German  experi- 
ence with  such  reforms  as  vocational  education,  old-age  pensions,  and 
the  like  ?    Of  what  positive  value  is  German  experience  ? 

4.  "America  would  be  a  p>oor  place  for  a  Hohenzollern  efficiency 
test"(Orth).    Why? 

5.  WTiat  is  the  goal  of  the  tentative  economic  program  which 
you  are  formulating  ? 


'      IV.    THE  PECUNIARY  BASIS  OF  ECONOMIC 
ORGANIZATION 

20.     Price  as  an  Organizing  Force 

A.  Perhaps  our  most  important  problem  is  an  improvement  in 
economic  organization.  Of  this,  many  of  our  current  problems,  such 
as  unemployment  and  crises,  are  mere  aspects.  To  understand  this 
problem  in  its  many  ramifications  we  must  understand  the  institutions 
which  make  up  our  economic  organization.  One  of  the  most  important 
of  these,  generally  overlooked  in  lay  discussion,  is  price. 

B.  38-40,  70,  95,  97,  319,  327. 

C.  I.  Following  the  suggestions  of  Cannan,  draw  up  a  report 
on  our  social  organization  for  the  Association  for  the  Advancement  of 
Science  of  Saturn.  2.  Enumerate  the  problems  which  would  have 
to  be  solved  by  a  committee  which  authoritatively  set  about  supplying 
New  York  City  with  consumptive  goods.  Could  they  solve  the 
problems  ? 

D.  I.  "In  place  of  disorderly  individual  effort,  each  man  doing 
what  he  pleases,  the  socialist  wants  organized  effort  and  a  plan" 
(H.  G.  Wells).  Is  the  implication  that  the  present  system  is  without 
order  and  plan  correct  ? 

2.  What  determines  the  number  of  each  of  the  following:  civil 
engineers?  bank  presidents?  hod-carriers?  horses?  automobiles? 
potatoes  ?  books  on  economics  ?  wheat  acreage  ?  steel  mills  ?  lino- 
type machines  ?    typewriters  ?   Is  there  any  system  here  ? 

3.  ''Price  is  an  industrial  barometer.  By  advancing  or  falling 
prices  producers  are  warned  that  society  desires  more  or  less  of 
certain  commodities."    Explain  with  illustrations. 

4.  "The  whole  machinery  of  buying  and  selling  is  simply  a 
convenient  means  of  combining  effectively  the  various  factors  in 
production  and  of  assigning  the  appropriate  shares  of  the  product 
to  those  who  have  claims  upon  it."  Explain  with  illustrations. 
Show  how  price  reglilates  consumption. 

5.  "Our  economic  co-operation  is  regulated  through  price- 
variations."    Explain. 

21.    Pecuniary  Competition 

A.  A  complementary  organizing  institution  is  pecuniary 
competition.  Through  its  selective  tests  production  is  organized, 
distribution  effected,  and  consumption  regulated.    It  is  no  antithesis 


24  CURRENT  ECONOMIC  PROBLEMS 

of  co-operation,  but  the  agency  through  which  the  varied  elements 
of  our  industrial  world  are  brought  into  active  co-operation. 

B.  68,  133,  176,  203,  254. 

C.  I.  By  citing  quite  divergent  examples  indicate  the  univer- 
sality of  competition.  2.  Following  Cooky's  argument,  show  how 
competition  organizes  college  activities.  3.  Criticize  Kingsley's  con- 
cept of  competition.  4.  What  is  the  fundamental  importance  of  the 
distinction  made  by  Adams?  5.  Is  competition  necessarily  asso- 
ciated with  laissez-faire?  6.  Can  competition  itself  have  an  ethical 
character  ?    If  not,  what  is  it  that  is  to  be  adjudged  good  or  bad  ? 

D.  I.  Is  there  any  competition  between  the  engineer  and  the 
lawyer?  the  hod-carrier  and  the  scavenger?  moving  pictures  and 
ice  cream?  a  warm  dinner  and  a  new  lace  collar?  a  piano  and  a 
trip  to  Europe?  hats  and  shoes?  an  unborn  child  and  a  new 
home? 

2.  What  is  the  basis  of  competition  between  college  students? 
members  of  the  same  ball  team  ?  rival  shoe  manufacturers  ?  econo- 
mists ?  dramatists  ?  good  fellows  ?  society  women  ?  settlement 
workers?  May  the  basis  of  competition  be  changed  in  any  of  these 
cases?  What  changes  in  the  "plane,"  or  general  conditions,  of 
competition  are  possible  ? 

3.  Is  there  any  competition  wixhin  a  public  business,  such  as 
education  ?  within  a  monopoly  ?  .  Would  there  be  competition  within 
a  business  under  socialism  ?  between  businesses  ?  In  which  of  these 
cases  would  competition  be  pecuniary?  non-pecuniary?  What 
substitute  can  be  found  for  competition  as  an  organizing  agency  ? 

4.  "A  producer  has  more  control  over  cost  than  over  selling 
price.  He  is  therefore  under  constant  temptation  to  use  cheap 
materials,  to  underpay  labor,  or  to  use  unfair  methods."  Is  this 
temptation  inherent  in  the  nature  of  the  competitive  system  ?  Can 
you  mention  instances  of  businesses  unable  individually  to  raise 
their  standards,  and  yet  welcoming  legislation  forcing  all  competitors 
to  a  higher  plane  ?    What  is  the  point  to  be  made  ? 

5.  "  Competition  is  not  law,  but  lawlessness.  In  competition,  not 
character,  but  cunning,  survives."  "Competition  was  the  gigantic 
motor  that  lifted  our  race  in  the  nineteenth  century  to  a  standard 
where  the  mode  of  living  of  common  laborers  is  more  comfortable 
and  desirable  than  the  everyday  existence  of  kings  of  whom  Homer 
sings."  Are  the  authors  of  these  two  quotations  talking  about  the 
same  thing? 

6.  "The  detailed  warfare  of  businesses  in  a  trade  is  a  truly  co- 
operative economy  which  enables  the  industrial  energy  of  the  whole 
trade  to  function  most  productively"  (Hobson).  Translate  and 
illustrate. 


PECUNIARY  BASIS  OF  ECONOMIC  ORGANIZATION       25 

7.  ''It  is  only  through  competition  that  price  can  cause  the 
limited  resources  of  society  to  be  used  in  such  a  way  as  to  produce 
goods  of  proper  kinds-  and  in  proper  quantities  to  afford  society  the 
maximum  of  utilities."    Make  this  intelligible.    Do  you  believe  it  ? 

22.     Price-Fixing  by  Authority 

A.  Prices  are  the  products  of  a  myriad  forces  which  express 
themselves  through  competition.  As  organizing  agents  they  lead  to  a 
myriad  of  consequences.  But  we  may  not  like  them;  their  conse- 
quences may  fail  to  satisfy  us.  In  such  cases  is  it  possible  to  set 
them  aside  and  substitute  others  more  to  our  liking  ?  This  question 
we  must  examine,  for  more  than  one  proposal  involving  the  substitu- 
tion of  "artificial"  for  "competitive"  prices  is  before  us. 

B.  17,  18,  208,  279,  282.  ' 

C.  I.  Why  could  not  the  provisions  of  the  Statute  of  Laborers 
be  enforced  ?  2.  How  is  "right  and  proper"  price  to  be  determined  ? 
3.  What  current  projects  of  reform  involve  proposals  similar  to  those 
of  the  Statute  of  Laborers  or  Luther's  proposed  commission?  4. 
Examine  the  case  for  and  against  "artificial"  price-fixing. 

D.  I.  Show,  by  citing  a  concrete  example,  say  that  of  the 
minimum  wage,  that  price-fixing  is  a  regulation  of  production,  dis- 
tribution, and  consumption. 

2.  Cite  as  many  examples  as  you  can  of  prices  fixed  by  custom 
or  authority.  How  are  these  to  be  explained  ?  How  does  a  monopoly 
manage  to  maintain  prices?  With  what  classes  of  commodities,  by 
what  devices,  and  within  what  limits  may  we  consciously  "fix  prices"  ? 

3.  How  did  it  come  about  that  so  many  "customary"  or  "right" 
prices  were  maintained  for  long  periods  during  the  Middle  Ages? 
Did  the  stability  of  economic  conditions  have  anything  to  do  with  it  ? 
How  many  of  these  customary  prices  survived  the  changed  conditions 
appearing  with  the  break-up  of  the  mediaeval  system  ? 

4.  Why  do  modern  states  attempt  to  regulate  the  rate  of  interest, 
but  make  no  similar  attempt  to  regulate  wages  ?  Do  they  succeed 
with  interest  ? 

23.     The  Function  of  Middlemen 

A.  Is  the  pecuniary  organization  of  society  which  we  have 
sketched  an  economic  one  ?  Do  pecuniary  rewards  and  useful  func- 
tions always  go  together  ?  To  take  a  single  example,  it  has  long  been 
insisted  that  "middlemen"  are  "parasites,"  that  they  "love  to  reap 
where  they  have  not  sown."  An  analysis  of  their  functions  shows 
that  we  could  not  easily  get  along  without  them.  That  we  could 
not  get  along  with  fewer  of  them  is  not* so  clear. 


26         CURRENT  ECONOMIC  PROBLEMS 

B.  358- 

C.  I.  Were  the  "forestallers"  condemned  by  mediaeval  statute 
and  by  Washington  analogous  to  the  middlemen  of  our  system? 
2.  On  the  basis  of  the  readings  from  Withers  and  Nourse,  make  a 
general  statement  of  the  functions  of  the  middleman.  Illustrate 
from  some  business  not  mentioned  in  the  readings. 

D.  I.  "Farmers,  miners,  fishermen,  and  manufacturers  have 
long  been  considered  producers.  But  productivity  was  long  denied 
the  services  of  ministers,  teachers,  musicians,  buffoons,  and  skirt 
dancers."  What  conception  of  wealth  is  at  the  basis  of  the  distinc- 
tion? In  what  respects  is  it  erroneous?  Why  have  men  been  so 
prone  to  regard  middlemen  as  non-producers  ? 

2.  ''The  seller  of  cut  glass  ware  frequently  makes  ioo,per  cent 
upon  his  merchandise;  druggists  not  infrequently  sell  prescriptions 
at  an  advance  of  200  per  cent  to  300  per  cent  above  th^  cost  of  the 
ingredients  going  into  them."  Do  these  percentages  in  themselves 
indicate  excessive  gains  ?  What  is  overlooked  by  the  author  of  the 
above  quotation  ? 

3.  A  man  who  had  paid  $4.00  for  a  barrel  of  apples  found  inside 
this  note:  ''Dear  Consumer:  I  was  paid  eighty-five  cents  for  this 
barrel  of  apples.  How  much  did  you  pay?  Producer."  Is  there 
e\dderice  that  either  producer  or  consumer  was  cheated  ? 

4.  One  of  seven  competing  grocers  advertises  in  the  paper.  Does 
it  pay  him  immediately  ?  What  will  the  other  grocers  do  ?  In  the 
end  how  much  better  off  will  anyone  be?  When  the  custom  has 
become  established,  can  a  grocer  cease  advertising?  The  costs  of 
advertising  will  eventually  be  borne  by  whom?  Does  competition 
tend  to  raise  or  lower  costs  of  production  ? 

5  "The  high  prices  made  possible  by  an  agreement  between 
retailers  yield  large  profits  which  draw  others  into  the  business.  In 
the  end  no  merchant  is  getting  an  excessive  return,  but  a  much 
larger  amount  of  capital  is  invested  and  a  greater  number  of  mer- 
chants are  employed  in  retail  merchandising  than  the  services  to  be 
performed  warrant."  Does  your  own  observation  bear  out  or  refute 
this  conclusion? 

24.     Speculation 

A.  They  who  insist  that  in  our  society  pecuniary  rewards  may 
be  wholly  dissociated  from  services  rendered 'bring  a  second  indict- 
ment, this  time  against  the  speculator.  The  charge  against  speculation 
is  much  more  serious  than  that  against  merchandising.  The  recent 
agitation  against  "dealing  in  futures"  makes  timely,  as  well  as  perti- 
nent, an  examination  of  the  place  of  speculation  in  the  organization 
of  industrial  life. 


PECUNIARY  BASIS  OF  ECONOMIC  ORGANIZATION       27 

B.  96,  132. 

C.  I.  Differentiate,  as  clearly  as  possible,  investment,  specula- 
tion, and  gambling.  2.  Show  by  concrete  illustrations  that  the  stock 
and  produce  exchanges  are  markets.  As  such,  what  functions  has  each 
to  perform?  3.  Draw  up  a  glossary  of  terms  used  in  speculation. 
4.  Using  a  hypothetical  illustration  of  your  own,  explain,  step  by  step, 
a  typical  speculative  transaction.  5.  Draw  up  a  system  of  accounts 
covering  the  transactions  mentioned  by  Stephens.  By  means  of 
these  show  the  utility  of  hedging.  6.  Using  a  hypothetical  illustra- 
tion, trace  the  course  of  the  price  of  a  given  stock  through  a  year, 
showing  the  various  forces  which,  affect  it.  7.  Give  examples  of 
manipulation  which  have  come  under  your  observation.  8.  Illus- 
trate the  economic  functions  performed  by  the  stock  exchange. 
9.  What  is  there  for  us  in  the  account  of  Germany's  experience 
with  exchanges  ?  10.  What  features  of  speculative  activity  do  you 
regard  as  good  ?  as  evil  ? 

D.  I.  Draw  Hnes  between  investment,  speculation,  and  gam- 
bling in  the  following  group  of  instances:  buying  a  share  of  stock 
with  the  intention  of  keeping  it  and  actually  keeping  it;  buying  it 
with  the  intention  of  keeping  it,  but  disposing  of  it  because  of  an 
unexpected  increase  in  price;  buying  it  with  the  object  of  keeping 
or  disposing  of  it  according  to  circumstances;  buying  it  for  cash  with 
the  object  of  selling  soon  at  a  profit;  buying  it  on  a  margin  with  the 
object  of  selling  at  a  profit. 

2.  Did  you,  as  a  college  student,  ever  take  a  difficult  course  and 
''hedge"  with  one  quite  easy  ?  Give  as  many  examples  as  you  can  of 
practices  analogous  to  hedging. 

3.  "  Speculation  in  wheat  tends  to  lower  the  price  of  flour  without 
lowering  the  price  of  wheat."    Show  how  this  comes  about. 

4.  "Speculation  tends  to  increase  the  supply  of  wheat  by  an 
addition  of  the  paper  supply  sold  by  the  bears,  thus  depressing  the 
price."    What  fact  is  overlooked? 

5.  "Under  the  conditions  fixed  by  organized  speculation  a  buyers' 
monopoly  of  wheat  or  cotton  is  an  impossibility.  A  buyers'  monoply 
of  tobacco  has  been  made  possible  by  the  very  fact  that  there  is  no 
organized  speculative  market  for  tobacco.  Thus  the  speculative 
market  is  a  strong  support  of  a  competitive  system."  Cite  other 
arguments  supporting  the  last  statement.    Is  it  valid  ? 

6.  Show  how  speculation  assists  in  establishing  a  single  price  in  a 
single  market.  How  comprehensive  does  it  tend  to  make  that  mar- 
ket ?    Show  how  this  price  acts  as  a  guide  to  production. 

7.  "The  stock  exchange,  that  delicate  register  of  values,  that 
sensitive  governor  of  production,  that  accurate  barometer  of  the 
people's  needs,  could  not  be  replaced  by  any  process  that  any  state 


28         CURRENT  ECONOMIC  PROBLEMS 

socialist  has  devised  or  suggested"  (Conant).  Explain  each  of  the 
above  phrases  descriptive  of  the  stock  exchange.  What  is  the  rela- 
tion of  speculation  to  the  pecuniary  organization  of  industry  under 
competition  ?  For  the  performance  of  these  functions  what  substitute 
can  you  suggest  ? 

8.  Follow  the  price  of  Pennsylvania  preferred,  one  other  railway, 
and  one  industrial  stock  from  now  on  to  the  close  of  the  course.  Plot 
on  a  graph  the  courses  of  these  three  securities.  Explain  all  general 
variations  of  the  market  as  indicated  by  the  three.  Explain  varia- 
tions in  each  of  these  from  the  courses  of  the  others. 

9.  Draw  up  a  legislative  program  which  will  strip  speculation  of 
"manipulation"  and  gambling  and  will  leave  it  as  free  as  it  is  at 
pi^sent  to  perform  its  proper  economic  functions. 

25.     The  Corporation 

A.  It  is  impossible  in  this  connection  to  make  a  study  of  all  the 
institutions  which  contribute  to  the  pecuniary  organization  of  society. 
It  has  been  found  necessary  to  treat  even  such  important  agencies  as 
the  family,  the  labor  union,  property,  and  contract  elsewhere.  But 
to  give  a  semblance  of  completeness  to  this  aspect  of  our  study,  it  is 
necessary  to  take  account  of  one  other  institution — the  corporation. 
Superficially  the  corporation  seems  to  involve  a  question  of  the  form 
of  organization  of  the  business  unit.  Basically,  however,  it  performs 
important  functions  in  the  larger  task  of  organizing  investments, 
management,  and  labor  into  productive  combinations. 

B.  96,  174,  213. 

C.  I.  Draw  up  a  glossary  of  the  terms  of  corporation  finance 
used  in  these  readings.  2.  What  are  the  advantages  to  the  corpora- 
tion and  to  the  public  in  issuing  different  classes  of  securities  ?  3.  Is 
it  to  the  interests  of  the  management  to  follow  a  policy  pecuniarily 
advantageous  to  the  owners?  4.  Is  the  welfare  of  the  corporation 
necessarily  dependent  upon  service  to  the  public  ?  5.  Show,  by  con- 
crete examples,  how  the  corporation  encourages  savings  and  increases 
the  productivity  of  capital.  6.  Does  the  corporation  increase  the 
productivity  of  labor  ?     of  managing  ability  ? 

D.  I.  Why  did  the  corporation  first  appear  in  the  commercial 
field  ?  What  economic  changes  are  responsible  for  its  general  invasion 
of  the  industrial  field?  Is  it  adapted  to  agricultural  industry?  to 
merchandising  ? 

2.  Draw  up  a  scheme  for  the  issue  of  corporate  securities  that 
will  throw  control  of  the  business  into  the  hands  of  those  who  will 
take  long  chances;  into  the  hands  of  those  who  will  play  safe. 


PECUNIARY  BASIS  OF  ECONOMIC  ORGANIZATION       29 


3.  "In  a  corporation  the  interests  of  the  owners,  the  management, 
and  the  public  are  out  of  harmony.  The  conflicting  interests  give 
rise  to  several  very  troublesome  problems."  Enumerate  and  illus- 
trate the  various  types  of  conflict  that  may  arise.  How  is  owner- 
ship to  be  protected  against  management?  against  the  public? 
How  is  the  public  to  be  protected  against  each  ? 

4.  "The  existence  of  the  corporation  imparts  fluidity  to  the 
various  factors  of  production  and  permits  them  to  be  used  in  the 
most  efficient  combinations."  Show,  by  illustration,  how  the  cor- 
poration utilizes  most  efficiently  business  ability,  capital,  and  labor. 

5.  "The  corporation  acts  as  an  insurance  against  risk  and  stimu- 
lates investment  in  new  enterprises."  Enumerate  and  illustrate  the 
functions  performed  by  the  corporation  in  industrial  development. 

6.  Is  there  any  causal  connection  between  the  corporation  and 
the  concentration  of  wealth?  the  stratification  of  society?  the 
appearance  of  a  leisure  clas^  ? 


V.    PROBLEMS  OF  THE  BUSINESS  CYCLE 
26.    The  Delicate  Mechanism  of  Industry 

A.  In  its  long-time  aspects  the  problem  of  economic  organization 
is  complicated  by  two  characteristics  of  the  industrial  system.  First, 
goods  are  being  produced  in  anticipation  of  demand  for  an  unknown 
future  market.  This  may  disappear  before  the  process  is  complete, 
causing  financial  losses  to  the  producers.  Secondly,  trades,  prices, 
and  credits  are  tied  together  into  a  closely  articulated  and  extremely 
sensitive  system.  By  reason  of  this  the  financial  disaster  mentioned  * 
threatens  to  become  quite  general. 

B.  30,  255. 

C.  I.  Show,  by  concrete  examples,  the  unknown  factors  in  the 
problems  with  which  "business  enterprise"  grapples.  2.  Give  illus- 
trations of  the  most  important  Hnes  of  price  relationship.  3.  Explain 
the  "sensitive  mechanism  of  credit"  by  beginning  at  a  point  other 
than  the  one  at  which  Moulton  begins.  4.  Enumerate  the  elements 
making  for  and  against  the  "planlessness"  of  production.  5.  Why 
is  the  organization  of  our  productive  system  subject  to  periodic 
disturbance  ? 

D.  I.  Compare  the  problem  of  efficient  economic  organization 
under  the  manorial  system  and  under  modern  industrialism.  If 
goods  were  produced  "to  order,"  could  modem  crises  and  depressions 
appear  ? 

2.  "The  lack  of  a  well-co-ordinated  system  of  control  makes 
industry  resemble,  at  present,  a  mob  rather  than  an  army."  Upon 
what  do  we  depend  for  a  correlation  of  industrial  units?  Is  the 
dependence  well  placed  ? 

3.  What  is  the  connection  between  the  "roundabout  process"  of 
production  and  oscillations  in  trade  ? 

4.  Connect  the  complicated  mechanism  between  producer  and 
consumer  and  that  between  accumulators  and  investors  of  capital 
with  periodic  disturbances  in  industry. 

5.  "Under  our  present  system  a  course  of  error  may  be  persisted 
in  for  a  considerable  time  without  retribution."  Illustrate.  What  is 
the  result  when  retribution  finally  comes? 

6.  "Our  present  system  permits  the  accumulation  of  debts  up 
to  the  point  where  they  can  no  longer  be  carried  and  a  general  collapse 
must  follow."  How  is  such  an  accumulation  possible?  Why  does 
the  collapse  come  ? 

30 


PROBLEMS  OF  THE  BUSINESS  CYCLE  31 

27.    The  Economic  Cycle 

A.  The  more  conspicuous  disturbances  to  which  the  industrial 
system  is  subject,  such  as  crises  and  depressions,  have  long  been 
noted.  Only  recently,  however,  have  economists  come  to  see  that 
there  is  a  persistent  variation  in  the  volume  of  business  and  to 
elaborate  a  definite  theory  of  the  "economic  cycle." 

B.  120,  121,  132,  259 

C.  I.  In  arguing  that  crises  come  "periodically,"  is  Nicholson 
arguing  that  they  come  at  regular  intervals  ?  Is  he  right  ?  2.  Begin- 
ning with  "flush"  times,  give  Mitchell's  explanation  of  the  course  of 
the  cycle.  3.  What  advantages,  if  any,  has  the  newer  theory  of 
"economic  cycles"  over  the  older  one  of  "crises"  ? 

D.  I.  Account  for  the  growing  tendency  to  treat  crises  as  an 
aspect  of  the  general  industrial  system  rather  than  as  a  mere  phase 
of  the  financial  system. 

2.  "  Crises  could  not  occur  at  regular  intervals."  If  it  were  known 
that  a  crisis  was  destined  to  appear  at  a  certain  time,  how  would 
men  act  ?    In  view  of  this  activity,  could  the  crisis  appear  ? 

3.  Using  an  economic  history  of  the  United  States  for  data,  write 
a. short  history  of  "Economic  Cycles  in  America." 

4.  Account  for  the  extreme  rhythm  of  business  activity  in  America. 
What  has  been  the  relation  of  railroad  building  to  the  extreme  sweep 
of  the  cycle  ? 

5.  What  place  has  each  of  the  following  in  the  theory  of  the 
economic  cycle:  money  economy?  time-consuming  methods  of 
production?  accumulations  of  new  capital?  development  of  tech- 
nique ?  application  of  machine  technique  to  our  continent  ?  extension 
of  industrialism  ?   world-wide  market  ?   war  ?   fashion  ? 

6.  Is  Mitchell's  explanation  of  the  business  cycle  to  be  regarded 
rather  as  a  contribution  to  financial  or  to  general  economic  theory  ? 

28.    The  Antecedents  of  Crises 

A.  Each  phase  of  the  economic  cycle  is  to  be  explained  in  terms 
of  that  which  preceded  it.  Thus  crises  can  be  made  intelligible  only 
in  view  of  their  general  industrial  and  financial  antecedents. 

B.  125,  158. 

C.  I .  In  view  of  the  theory  of  the  economic  cycle  do  you  regard 
the  account  of  the  causes  of  the  panic  of  1893  as  presented  by  Lauck 
adequate?  2.  What  criticism  can  you  make  of  Lough's  criteria  for 
sizing  up  an  industrial  situation  ?  3.  From  the  evidence  presented  in 
103-5  give  an  account  of  the  general  conditions  out  of  which  the  panic 
of  1907  came.  4.  What  is  the  relation  of  capitahstic  monopoly  to  the 
rhythm  of  business  activity  ? 


32         CURRENT  ECONOMIC  PROBLEMS  • 

D.  I.  Using  the  criteria  of  Lough,  make  a  careful  study  of  the 
industrial  conditions  preceding  the  panic  of  1893. 

2.  From  all  the  available  data  which  you  can  get  together,  what 
are  your  general  conclusions  about  the  "causes"  of  the  panic  of  1893  ? 
Were  they  industrial  or  financial?  What  criticisms  of  Lauck  does 
your  study  lead  to  ? 

3.  "The  period  intervening  between  the  end  of  one  crisis  and  the 
beginning  of  another  has  four  distinct  stages:  first,  the  depression 
proper;  second,  a  season  of  steady  improvement;  third,  a  season  of 
rapid  improvement;  fourth,  a  collapse."  Are  the  four  stages  distinct  ? 
Illustrate  for  the  period  from  1893  to  1907. 

4.  "One  of  the  fundamental  conditions  leading  to  a  crisis  is  an 
improper  balance  between  capital  tied  up  in  long-time  and  short-time 
processes."  Show,  by  concrete  examples,  how  tying  up  too  large  a 
proportion  of  capital  in  long-time  investments  tends  to  precipitate 
a  crisis. 

5.  From  all  the  evidence  at  your  disposal  draw  up  a  list  of  the 
general  conditions  out  of  which  crises  arise.  Arrange  these  in  the 
order  of  their  importance. 

29.    The  Course  of  a  Crisis 

A.  Crises  are  alike  and  they  are  different.  There  is  something 
of  uniformity  in  the  courses  which  they  take;  there  is,  also,  much  of 
individual  variation.  These  characteristics  can  be  best  shown  by  a 
comparative  study. 

C.  I.  Distinguish  between  panics  and  crises.  2.  Compare  the 
courses  of  the  panics  of  1893  and  1907.  What  have  they  in  common  ? 
What  are  their  differences?  3.  What  modifications  of  Hadley's 
statement  of  the  order  of  events  in  a  crisis  does  your  study  suggest  ? 

D.  I.  From  the  evidence  contained  in  newspapers  and  financial 
weeklies  make  a  study  of  the  course  of  the  crisis  of  1873, 1893,  or  1907. 

2.  "The  usual  signal  for  the  beginning  of  a  crisis  is  a  conspicuous 
banking  or  mercantile  failure."  Shall  we  substitute  the  word  " cause " 
for  "signal"  above?    Shall  we  substitute  "universal"  for  "usual"? 

3.  Trace  the  prices  of  two  safe  and  two  risky  stocks  from  the 
latter  part  of  a  flush  period  through  a  crisis  into  the  succeeding 
depression.    Explain,  as  clearly  as  you  can,  changes  in  prices. 

4.  Show  quite  definitely  how  a  crisis  affects  the  activities  and 
welfare  of  the  laborer,  the  farmer,  the  manufacturer,  the  banker,  the 
merchant,  the  exporter,  the  government  employee,  the  professional 
man,  the  funded-income  recipient,  the  real  estate  owner. 

5.  "The  characteristics  of  an  acute  crisis  are  loss  of  confidence^ 
scarcity  of  cash,  and  high  rates  of  discount."     Should  "panic"  be 


PROBLEMS  OF  THE  BUSINESS  CYCLE  33 

substituted  for  "crisis"?    Which  of  the  characteristics  mentioned 
are  essential  ?    Which  are  mere  symptoms  ? 

30.    Financial  and  Industrial  Conditions  during  a  Crisis 

A.  No  summary  statement  of  financial  and  commercial  condi- 
tions during  a  crisis  is  possible.  In  lieu  thereof  the  contemporary 
material  presented  in  the  readings  will  suggest  a  few  typical  features. 
The  outline  picture  presented  can  be  rounded  out  by  later  study. 

C.  I.  Draw  up  a  table  of  the  various  aspects  of  industrial  and 
financial  life  mentioned  in  the  readings.  2.  Under  each  heading 
of  your  table  state  the  conditions  prevailing  in  1893  and  in  1907. 
3.  From  this  evidence  state  the  general  conclusions  you  reach  as 
to  industrial  and  financial  conditions  in  times  of  crisis. 

D.  I.  "During  crises  many  producers  have  supplies  of  goods  in 
excess  of  the  demand  for  them."  Exactly  what  does  this  mean? 
In  what  industries  do  you  expect  to  find  largest  excesses  ?    Why  ? 

2.  By  use  of  a  graph  trace  the  course  of  the  rate  on  call  loans  on 
the  New  York  market  during  the  crises  of  1893  and  1907.  Similarly 
trace  the  course  of  the  rate  of  exchange  on  London. 

3.  "The  rate  of  interest  depends  upon  the  demand  for  and  supply 
of,  not  money,  but  capital."  "  During  crises  excessive  rates  of  interest 
are  paid,  not  for  capital,  but  for  money  loans."  Are  these  statements 
contradictory  ? 

4.  "A  premium  on  currency,  frequently  quoted  during  crises,  is, 
in  reahty,  nothing  else  than  a  depreciation  of  bank  deposits."    Explain. 

5.  "In  the  earlier  stages  of  a  crisis  the  investor  is  affected  much 
sooner  and  to  a  much  greater  extent  than  the  laborer."  What  makes 
the  author  think  so  ?    Is  he  right  ? 

6.  Using  the  table  of  aspects  of  industrial  and  financial  life  which 
you  have  drawn  up,  make  a  detailed  comparison  of  conditions  during 
crises  and  flush  times. 

31.    Industrial  Conditions  during  a  Depression 

A.  The  depression  has  never  received  the  attention  warranted 
by  the  importance  of  its  place  in  the  cycle.  Its  literature  is  very 
meager.  Again  we  must  attempt  to  extract  from  a  few  contemporary 
paragraphs  an  outline  picture  of  its  typical  features. 

B.  loi,  257. 

C.  I.  Distinguish  between  a  crisis  and  a  depression;  a  panic 
and  a  depression.  2.  May  any  one  of  these  occur  independently  of 
the  other  two  ?  3.  In  117  what  items  are  taken  as  typical  of  general 
business  conditions  ?    Why  ?    4.  Are  the  conditions  mentioned  in  1 17 


34         CURRENT  ECONOMIC  PROBLEMS 

as  you  would  expect  them  to  be  in  view  of  Mitchell's  theory  of  the 
cycle? 

D^  I.  Trace  out  quite  carefully  the  transition  from  the  crisis  of 
1893  to  the  depression  which  followed  it;  the  transition  from  the 
crisis  of  1907  to  the  succeeding  depression. 

2.  Why  are  bank  clearings  and  freight  mileage  taken  as  the  best 
indicia  of  the  state  of  industry  in  the  country  ?  Can  you  mention 
others  equally  good  ? 

3.  Trace  out  in  graphical  form  the  course  of  two  railway  and  two 
industrial  stocks  for  three  months  of  a  flush  period  and  the  course  of 
the  same  stocks  for  three  months  of  a  subsequent  depression.  In  a 
like  manner  trace  out  the  rate  on  call  loans. 

4.  "During  a  depression  the  industrial  machine  seems  to  be  half- 
stalled."  What  features  of  the  depression  suggest  the  analogy?  Is 
it  exact  ? 

5.  Using  such  materials  as  you  can  get  together  and  applying 
the  criteria  you  have  formulated,  determine  at  what  point  of  the 
industrial  cycle  we  are  at  the  present  time. 

32.    Typical  Theories  of  Crises 

A.  Our  study  has,  perhaps,  already  led  to  a  tentative  theory  of 
the  economic  cycle.  But,  before  putting  it  down  in  black  and  white, 
it  is  well  to  seek  further  light  by  examining  the  theories  of  crises 
which  have  been  formally  advanced.  W^e  cannot  study  all  of  them, 
for  their  number  is  legion.  But  the  selections  assigned  present 
examples  of  the  leading  types. 

B.  loi,  102,  144,  148,  203,  255. 

C.  I.  Separate  the  theories  which  make  up  this  assignment  into 
groups  and  give  a  name  to  each.  2.  Make  a  definite  statement  and 
a  critical  analysis  of  each  with  the  end  of  determining  its  validity. 
3.  What  other  theories  are  suggested  to  you  by  the  additional  read- 
ings, by  former  assignments,  or  by  your  general  reading?  4.  Are 
there  elements  of  these  theories  which  you  can  incorporate  into 
your  explanation  of  the  economic  cycle?  5.  Make  a  careful  state- 
ment of  your  own  theory  of  the  economic  cycle. 

D.  I.  Are  crises  most  characteristic  of  non-industrial  countries, 
thoroughly  industrialized  countries,  or  countries  in  process  of  in- 
dustriaUzation  ? 

2.  "The  extension  of  the  machine  system  is  the  primar}^  cause  of 
crises.  It  diverts  more  and  more  of  our  productive  resources  from 
the  production  of  'staples'  to  the  production  of  'specialties.'  Thus 
more  and  more  goods  are  produced  for  an  uncertain  and  capricious 
market."    Present  this  argument  more  fully.     Can  a  similar  argu- 


PROBLEMS  OF  THE  BUSINESS  CYCLE  35 

ment  be  made  for  immigration  ?  In  what  other  ways  may  the  machine 
technique  be  regarded  as  a  contributory  factor  in  crises?  How 
valid  is  the  argument  presented  above  ? 

3.  "The  cause  of  crisis  lies  in  the  varying  proportion  which  the 
capital  devoted  to  permanent  and  remote  investment  bears  to  that 
which  is  temporarily  invested."  "The  essential  cause  of  a  crisis  is 
the  rupture  of  the  equilibrium  between  agriculture  and  industry." 
State  the  arguments  leading  to  each  conclusion. 

4.  "Crises  arise  from  the  development  of  an  inequaUty  between 
future  incomes  and  their  present  capitalized  values."  Explain,  using 
a  concrete  illustration,  just  what  this  means.  Does  this  suggest  any 
theories  previously  discussed  ?  Can  this  and  the  two  statements  in 
the  preceding  question  be  made  parts  of  a  larger  and  more  compre- 
hensive theory? 

5.  "All  industry  may  be  compared  to  carrying  water  to  a  central 
tank.  The  capitalists  own  the  tank,  the  springs,  the  buckets,  and 
all  the  implements.  For  every  two  buckets  of  water  which  the 
laborer  carries  to  the  tank  he  receives  as  wages  one  bucket  of  water. 
Under  these  conditions  the  tank  must  inevitably  overflow,  since 
capitalists  can  drink  no  more  water  than  anyone  else.  When  the 
tank  thus  becomes  full,  the  capitalist  will  no  longer  hire  the  laborer 
to  carry  water.  That  is,  all  industry  will  cease.  In  other  words, 
there  will  be  a  financial  panic."  What  name  is  to  be  given  to, this 
theory?  Wherein  is  the  analogue  imperfect?  Wherein  does  the 
argument  fail? 

6.  "A  vast  outlay  on  enterprises  involving  a  large  consumption 
of  present  goods,  whether  in  the  way  of  pure  waste  or  temporary 
unproductiveness, ought  always  to  suggest  a  feeling  of  danger."   Why  ? 

7.  "The  main  cause  of  crises  is  the  sudden  realization  of  the 
insufficiency  of  capital  to  meet  present  demands."  Connect  the  sud- 
denness of  realization  with  the  functions  of  the  financial  middleman. 

8.  "The  essential  cause  of  crises  is  lack  of  confidence."  But 
why  is  confidence  eventually  lost  ? 

9.  "Crises  have  no  one  sole  and  sufficient  cause.  They  arise  out 
of  the  economic  situation  as  a  whole."  State,  with  adequate  detail, 
why  you  agree  or  disagree  with  this  statement. 

^  33.     Credit  and  Crises  • 

A.  From  one  point  of  view  the  industrial  system  is  a  vast  and 
bewildering  complex  of  present  and  future  values.  The  maladjust- 
ment of  these,  owing  to  fallibility  in  prediction,  is  intimately  connected 
with  the  rhythm  in  business  activity.  It  is  fitting,  therefore,  even  if 
pecuniary  institutions  be  beyond  the  horizon  of  our  study,  to  dwell 


36         CURRENT  ECONOMIC  PROBLEMS 

briefly  upon  the  relation  of  credit,  which  mediates  present  and  future 
values,  to  the  business  cycle. 

B.  28,  97,  98,  122,  123,  129. 

C.  I.  What  is  meant  by  the  ''cyclical  demand  for  elasticity  of 
credit"  ?  2.  Show,  by  example,  how  "emergency  credit"  reduces  the 
stress  of  a  financial  crisis.  3.  Can  the  possibility  of  the  issue  of 
''emergency  credit"  lessen  the  general  rhythm  of  business  activity? 
prevent  rhythm  altogether?  4.  Compare  the  "national  banking" 
and  the  "new  currency"  systems  in  respect  to  emergency  elasticity 
of  credit;  emergency  elasticity  of  note  issue. 

D.  I.  "Credit  is  a  pecuniary  instrument  which  mediates  present 
and  future  values."  Translate.  What  part  does  credit  play  in  the 
rhythm  of  business  activity  ? 

2.  "During  the  panic  of  1907  the  President  of  the  United  States 
allowed  an  evasion  of  a  federal  statute  to  prevent  the  failure  of  a 
large  corporation.  He  permitted  this  corporation  to  be  absorbed  by 
a  larger  and  financially  stronger  one."  Could  the  necessity  of  absorp- 
tion be  attributed  to  any  feature  of  the  contemporary  banking  system  ? 
Was  the  act  of  the  President  defensible  ? 

3.  "The  national  banking  system,  which  originated  in  1863,  was 
based  upon  the  necessity  of  finding  a  market  for  government  bonds." 
What  particular  problem  confronted  the  government  at  that  time? 
How  did  the  creation  of  the  national  banking  system  contribute  to 
the  solution  of  the  problem  ?  What  fundamental  needs  of  an  adequate 
credit  system  were  overlooked  ? 

4.  "The  national  banking  system  was  perfectly  adapted  to  con- 
centrating cash  and  restricting  credits."  How  did  it  concentrate 
cash?  restrict  credit?  What  relation  has  such  concentration  and 
restriction  to  the  rhythm  of  business  activity  ? 

5.  Would  the  establishment  of  a  central  bank  eliminate  the 
rhythm  of  business  activity?  Would  it  lessen  it  more  than  the 
"federal  reserve"  system  is  likely  to  do  ? 

6.  "The  signing  of  the  act  creating  the  federal  reserve  system 
marks  the  end  of  the  severe  industrial  and  financial  crises  which  the 
United  States  has  experienced  periodically  in  the  past."  Do  you 
agree  ? 

34.     Control  of  the  Industrial  Cycle 

A.  At  last  we  reach  the  real  problem  of  the  business  cycle.  Is 
it  desirable  that  an  attempt  be  made  to  control  the  rhythm  of  business 
activity,  and  through  it  the  pecuniary  organization  of  society  in  its 
long-time  aspects?  If  such  control  is  desirable,  is  it  possible?  If 
possible,  what  are  the  proper  ways  and  means?  In  formulating  a 
program,  if  such  be  attempted,  let  us  not  forget  that  it  must  have 
its  basis  in  the  theory  of  the  nature  of  the  cycle  which  our  analysis 


PROBLEMS  OF  THE  BUSINESS  CYCLE  37 

has  revealed.   It  must  be  grounded  upon  fundamental,  not  superficial, 
conditions.  * 

B.  34,  96-99,  257- 

C.  I.  State  as  clearly  as  you  can  the  fundamental  conditions 
leading  to  the  rhythm  in  business  activity;  the  essential  character- 
istics of  the  cycle.  2.  Enumerate  the  "remedies,"  proposed  in  the 
readings  or  elsewhere,  which  merely  "treat  symptoms."  3.  What 
proposals  can  be  garnered  from  the  readings  for  use  in  a  program 
dealing  with  fundamental  conditions?  4.  Is  the  "severity  of  the 
trade  cycle"  a  price  which  the  United  States  must  pay  for  rapid 
industrial  development  in  the  future  ? 

D.  I.  "During  periods  of  depression  the  government  should 
confiscate  savings  which  lie  idle  in  banks,  and  use  them  for  the  con- 
struction of  public  works  of  permanent  value.  Such  an  expenditure, 
by  increasing  the  demand  for  goods  and  labor,  would  hasten  the 
return  of  business  to  normal  conditions."  What  costs  would  the 
carrying  out  of  such  a  proposal  involve  ?  Would  its  results  be  worth 
the  cost?  I 

2.  Enumerate  the  costs  which  the  Webbs  overlook  in  their  pro- 
posal of  "the  cyclical  distribution  of  government  orders."  What 
effects  would  the  application  of  their  proposal  have  upon  the  pecuniary 
organization  of  society  ?    Would  its  results  justify  the.  cost  ? 

3.  "The  most  troublesome  of  the  problems  usually  included  under 
the  head  of  'unemployment'  is  inseparably  connected  with  the  busi- 
ness cycle."  What  have  you  learned  about  how  the  problem  of 
"cyclical  unemployment"  cannot  be  solved  ?  Have  you  any  positive 
suggestions  to  make  for  its  solution  ? 

4.  "Crises  and  depressioi],s  together  eliminate  from  the  industrial 
world  unsound  business  units.  It  is  through  them  that  the  survival 
of  the  fittest  becomes  industrially  effective."    Do  you  agree  ? 

5.  "  Crises  and  depressions  are  the  price  which  a  highly  industrial 
state  pays  for  its  progress."  Is  this  statement  true  ?  Can  this  and 
the  statement  above  both  be  true  ? 

6.  "The  slowing  up  of  development  within  a  nation  offers  "no 
immunity  from  the  disturbances  originating  in  expanding  industry. 
Such  slowing  up  is  always  accompanied  by  the  export  of  capital  to, 
and  the  import  of  securities  from,  the  undeveloped  parts  of  the  world. 
Such  parts  are  thus  made  an  integral  part  of  the  national  economic 
system,  and  disturbances  originating  there  affect  the  domestic  indus- 
trial system."  Is  this  conclusion  valid  ?  In  its  light  criticize  the  two 
statements  immediately  preceding  and  the  conclusions  in  132  and  in 
the  last  paragraph  of  the  introduction  to  V. 

7.  Formulate  a  program  for  securing  a  more  adequate  pecuniary 
organization  of  industrial  activities,  considered  in  their  long-time 
aspect. 


VI.    PROBLEMS  OF  INTERNATIONAL  TRADE 
35.     The  Basis  of  International  Trade 

A.  We  have  studied  at  some  length,  both  in  their  immediate  and 
in  their  long-time  aspects,  the  problems  involved  in  the  pecuniary 
organization  of  society.  There  remains  for  discussion  the  territorial 
limits  of  the  pecuniary  unit.  Shall  the  industrial  system  be  left  free 
to  organize  itself  on  pecuniary  lines,  irrespective  of  local,  class,  group, 
or  political  interests  ?  Or,  should  such  organization  be  subordinated 
to,  or  restricted  by,  such  interests  ?  We  can  best  begin  this  study  by 
determining  what  basis  there  is  for  a  comprehensive  pecuniary  organi- 
zation that  transcends  political  and  social  lines. 

B.  I,  32,  68,  97. 

C.  I.  Connect  the  problems  of  international  trade  with  the 
problems  of  the  pecuniary  organization  of  society.  2.  Make  a  classi- 
fication of  the  advantages  of  international  trade  upon  some  other 
basis  than  that  of  importation  and  exportation.  3.  Make  an  appli- 
cation of  the  law  of  comparative  cost  to  the  relations  of  individuals; 
of  economic  groups;  of  nations.  4.  State,  with  illustrations  of  your 
own,  the  "theory  of  free  trade."  5.  Is  the  theor>'  of  free  trade  based 
upon  the  assumption  of  the  perfection  of  the  organization  of  society 
upon  a  pecuniary  basis  ? 

D.  I.  Why  should  an  effort  be  made  to  place  territorial  rather 
than  religious,  cultural,  or  class  restrictions  on  trade  ? 

2.  In  a  mediaeval  sermon  occur  these  sentences:  "The  third 
are  such  as  are  busied  with  trade;  we  cannot  do  without  them.  They 
bring  from  one  kingdom  to  another  what  is  good  cheap  tHere,  and 
whatever  is  good  cheap  beyond  the  sea  they  bring  to  this  town,  and 
whatever  is  good  cheap  here  they  carry  over  the  sea."  What  theory 
of  international  trade  underlies  these  statements  ? 

3.  "Trade  is  based  upon  differences  in  productive  powers." 
Illustrate  for  both  domestic  and  foreign  trade. 

4.  "International  trade  may  be  based  upon  differences  in  (a) 
natural  resources,  (b)  technical  systems,  (c)  proportion  between  popu- 
lation and  industrial  equipment,  (d)  native  capacities  of  the  peoples, 
or  (e)  traditions  of  workmanship."  Upon  what  other  differences  may 
it  rest?  Mention  examples  of  trade  resting  upon  each  of  these 
differences.  Upon  what  differences  does  the  trade  between  the  United 
States  and  foreign  countries  rest  ? 

38 


'      ,  PROBLEMS  OF  INTERNATIONAL  TRADE  39 

5.  "International  trade,  based  upon  differences  in  relative  supply 
of  labor,  is  of  diminishing  importance."    Why  ? 

6.  ''In  Cuba  the  costs  of  producing  olives  and  bananas  are  as 
7:3;  in  Greece  they  are  as  i :  19."  Will  trade  between  the  two  coun- 
tries pay  ?  Which  will  export  bananas  ?  If  Cuba  has  an  advantage 
over  Greece  in  the  production  of  each  of  the  commodities,  will  ex- 
change pay  ? 

36.     The  Mechanism  of  International  Trade 

A.  The  greatest  source  of  confusion  in  popular  discussions  of 
foreign  commercial  policy  is  a  failure  to  conceive  of  foreign  trade  as 
"exchange."  This  is  due,  usually,  to  an  erroneous,  or  an  inadequate, 
understanding  of  the  mechanism  of  such  trade.  To  give  such  an 
understanding  as  will  serve  for  an  intelligent  discussion  of  tariff 
problems  is  the  purpose  of  this  section. 

C.  I .  Show,  by  illustrations  of  your  own,  how  the  use  of  "money" 
in  domestic  trade  is  reduced  to  a  minimum.  2.  Show  how  the  same 
object  is  accomplished  in  foreign  trLde.  3.  Are  the  adjectives  "favor- 
able" and  "unfavorable,"  as  applied  to  trade  balances,  apt?  Do 
they  tend  to  encourage  clarity  of  thought  ?  4.  Can  there  be  such  a 
thing  as  a  "balance  of  trade"  ?  5.  Mention  the  principal  "invisible" 
imports  and  exports.  Why  should  we  take  particular  notice  of  them  ? 
6.  Demonstrate  the  proposition  that  "international  debts  are  usually 
paid  in  goods." 

D.  I.  "Economically  considered,  no  distinction  can  be  made 
between  domestic  and  foreign  trade."    Prove. 

2.  "A  country  gains  from  foreign  trade,  only  on  condition  that 
its  exports  exceed  its  imports,  in  which  case  the  balance  is  paid  in 
gold."  "A  country  gains  from  foreign  trade,  only  on  condition  that 
its  imports  exceed  its  exports,  in  which  case  it  gets  more  than  it  gives." 
In  which  statement  dwells  truth  ? 

3.  "Every  year  we  pay  millions  to  Great  Britain  for  carrying 
goods  between  this  and  foreign  nations.  Think  of  it.  Millions  on 
millions  in  gold  coin  have  been  transferred  from  our  coffers  to  those 
of  England.  How  long  can  we  stand  this  ?  "  Do  we  pay  England  in 
gold  for  carrying  our  goods  ?  How  do  we  pay  ?  Is  it  necessarily  true 
that  we  should  be  richer  if  we  built  ships  and  carried  the  goods 
ourselves  ? 

4.  "A  few  towns  in  Germany  produce  more  children's  toys  than 
the  whole  of  the  United  States.  This  fact  is  greatly  to  Germany's 
credit,  but  it  is  very  discreditable  to  us."    Is  it  ? 

5.  "I  have  it,  on  the  authority  of  government  statistics,  that  our 
losses  in  trade  with  South  America,  through  an  excess  of  imports 


40         CURRENT  ECONOMIC  PROBLEMS 

over  exports,  have  exceeded  the  cost  of  the  Civil  War.  The  South 
Americans  have  thus  received  billions  of  dollars'  worth  of  goods  at 
our  expense."  Prove,  by  a  similar  argument,  that  we  have  obtained 
billions  of  dollars'  worth  of  goods  at  England's  expense. 

6.  "An  importation  of  gold  to  pay  for  goods  purchased  here 
tends  automatically  to  check  itseH."    Demonstrate. 

7.  ''To  the  extent  that  the  domestic  market  is  wrested  from 
foreigners  and  given  to  protected  home  producers,  the  foreign  market 
is  wrested  from  unprotected  home  producers."    Demonstrate. 

37.    The  Demand  for  Local  Protection 

A.  The  case  for  protection  can  be  clearly  appraised  only  when  a 
clear  distinction  is  made  between  valid  social  interests  and  the  inter- 
ests of  particular  individuals,  groups,  or  localities  masquerading  as 
social  interests.  A  study  of  the  demand  for  local  protection  serves 
to  reveal  the  nature  of  the  latter  interests  by  revealing  them  un- 
masked. It  has  the  added  advantage  of  showing  that,  where  the 
government  cannot  be  used,  there  are  many  other  social  agencies 
which  can  be  made  to  serve  a  pecuniary  purpose. 

B.  134,  i35>  138. 

C.  I.  What  function  is  erroneously  attributed  to  money  in  the 
arguments  for  keeping  trade  at  home  ?  2.  Are  these  arguments  sound 
from  the  standpoint  of  the  interested  parties  ?  of  communities  repre- 
sented? of  the  larger  industrial  entity?  3.  What  valid  arguments 
can  be  advanced  in  favor  of  patronizing  home  industries  ?  4.  Using 
an  example  which  has  come  under  your  personal  observation,  write 
an  essay  upon  ''The  Seen  and  the  Unseen." 

D.  I.  "If  Massachusetts  were  allowed  to  levy  a  protective  tariff, 
it  could  add  to  its  huge  aggregate  of  industries  a  great  banana  indus- 
try." Could  Massachusets  through  protection  build  up  a  banana  indus- 
try ?    Would  this  constitute  a  net  addition  to  the  wealth  of  the  state  ? 

2.  Before  the  adoption  of  the  United  States  Constitution  the 
state  of  New  York  levied  a  protective  duty  on  firewood  shipped 
into  the  state  from  Connecticut.  Did  it  act  wisely  ?  If  there  were 
no  constitutional  restrictions,  would  you  expect  the  states  of  the 
Union  now  to  levy  protective  duties  against  each  other  ?  the  towns  ? 

3.  "  The  imposition  of  restrictions  on  trade,  either  through  govern- 
mental authority  or  the  creation  of  popular  prejudices,  interferes  with 
a  thoroughgoing  division  of  labor  and  the  organization  of  industrial 
society  on  the  most  comprehensive  plan."    Do  you  agree  ? 

4.  "  The  inhabitants  of  small  towns  are  short-sighted  in  patron- 
izing mail-order  houses.  There  are  some  articles  of  imperative 
necessity  which  they  must  purchase  from  local  merchants.    Such 


PROBLEMS  OF  INTERNATIONAL  TRADE       41 

merchants,  with!  the  whole  of  the  retail  trade  of  the  towns,  barely 
manage  to  maintain  themselves.  If,  then,  they  are  denied  a  part  of 
this  trade,  they  must  eventually  go  out  of  business.  Then  the 
inhabitants  of  the  towns  will  be  put  to  sad  shift  for  these  necessities." 
Is  this  argument  valid  ? 

38.    The  Perennial  Argument  for  Protection 

A.  The  individual,  group,  and  local  interests  revealed  in  the 
last  section  are  often  conspicuously  active  in  securing  governmental 
restrictions  on  trade.  How  easy  it  is  to  translate  particular  into 
social  interests,  and  how  honored  and  venerable  a  large  number  of  the 
arguments  for  restriction  are,  this  section  attempts  to  demonstrate. 

B.  5,  12,  19,  77. 

C.  I.  List  the  arguments  for  restriction  advanced  by  the  six- 
teenth- to  eighteenth-century  authorities;  the  arguments  advanced 
by  the  twentieth-century  authorities.  2.  Strike  out  the  arguments 
common  to  each  list.  What  arguments  have  you  left  ?  3.  Appraise  the 
economic  theory  underlying  each  of  the  arguments  advanced. 

D.  I.  "The  principle  of  protection  is  sound,  but  under  our 
conditions  the  national  unit  is  too  large  for  its  efficient  application. 
The  South,  which  is  just  beginning  to  manufacture  cotton,  needs 
protection,  not  against  the  mills  of  Europe,  but  the  mills  of  New 
England."  Is  this  argument  sound?  What  is  the  proper  economic 
unit  which  should  be  protected  ? 

2.  "I  believe  in  universal  free  trade  by  international  agreement. 
But,  if  other  countries  are  intent  upon  maintaining  protection,  it  is 
only  fair  to  ourselves  to  do  the  same."  What  is  the  great  economic 
loss  in  having  other  countries  shut  out  our  goods?  Can  we  better 
matters  by  shutting  out  theirs  ? 

3.  "A  country  has  never  been  despoiled  of  its,  money  by  the 
working  of  its  international  trade"  (Gide).  Why  does  the  author 
feel  so  sure  about  this  ? 

39.    The  Case  for  Protection 

A.  Despite  the  preponderance  of  local  and  particular  arguments, 
the  policy  of  protection  has  a  comprehensive  social  basis.  It  is  the 
purpose  of  this  section  to  reveal  this.  It  springs  from  a  general  dis- 
crediting of  the  theory  of  laissez-faire,  a  conception  of  society  in 
developmental  terms,  and  an  abiding  faith  in  the  conscious  control 
of  industrial  evolution. 

B.  "50,  68,  135,  161. 

C.  I.  Compare  the  assumptions  underlying  List's  argument  with 
those  of  "free-trade"  writers.    2.  Under  present  conditions  is  List's 


42         CURRENT  ECONOMIC  PROBLEMS 

argument  a  defense  of  protection  or  of  free  trade  ?  3.  Is  the  current 
validity  of  the  "young-industry"  argument  practical  or  merely 
academic?  4.  What  attack  does  the  argument  that  protection  en- 
courages capital  formation  make  upon  the  assumptions  of  the  free- 
trade  argument  ?  5.  Make  a  careful  appraisal  of  the  assumptions  of 
the  argument  for  free  trade.  6.  Can  protection  alone  secure  the 
"industrial  mobilization"  necessary  to  national  defense? 

D.  I.  "Through  our  policy  of  protection  men  have  been  induced 
to  invest  capital  in  enterprises  which,  under  free  trade,  would  be 
unprofitable.  Since  the  government  has  encouraged  such  investments, 
it  must  protect  them."  What  name  is  given  to  this  argument? 
What  current  validity  has  it  ? 

2.  "A  nation  exporting  grain  in  large  quantities  can  profit  tre- 
mendously through  protection,  which  diverts  labor  and  capital  from 
agricultural  to  manufacturing  industries.  Because  of  the  peculiar 
demand  for  grain,  a  smaller  total  product  can  be  sold  for  a  greater 
sum  than  a  larger  total  product.  By  such  diversion  foreign  nations 
can  be  made  to  bear  the  expense  of  newly  created  manufacturing 
industries."  What  conditions  must  be  added  to  those  enumerated 
above  to  make  the  conclusion  valid  ? 

3.  "The  protective  tariff  has  the  incidental  advantage  of  forcing 
the  foreigner  to  pay  a  large  part  of  the  cost  of  running  the  govern- 
ment." In  general,  are  customs  taxes  paid  by  foreigners  ?  Can  you 
point  to  cases  in  which  they  do  pay  them?  In  such  cases  do  the 
duties  yield  protection  ? 

4.  "The  argument  against  protection  is  that  it  diverts  labor  and 
capital  from  more  productive  to  less  productive  industries.  The 
obvious  answer  is  that  it  creates  the  capital  and  induces  the  immi- 
gration of  the  labor  employed  in  protected  industries."  Where 
Hes  the  truth  ? 

5.  "Protection  has  served  to  convert  a  large  amount  of  consump- 
tive into  productive  wealth,  and  has  concentrated  this  in  the  hands 
of  the  class  best  fitted  to  secure  the  maximum  returns  from  it."  Do 
you  agree  ? 

6.  "Protection  may  serve  a  useful  purpose  in  conserving  the 
natural  resources  of  a  country."  How?  Can  it  be  made  to  waste 
natural  resources  ? 

7.  "  Protection  may  aid  in  the  preservation  of  the  health  and  vigor 
of  a  people  through  the  maintenance  of  a  proper  balance  between 
manufacturing  and  agriculture,  between  city  and  country."  How? 
Can  free  trade  be  sued  to  secure  such  a  result  ? 

8.  "The  success  of  protection  is  contingent  upon  the  generosity 
with  which  its  favors  are  bestowed."  Develop  and  appraise  this 
argument. 


PROBLEMS  OF  INTERNATIONAL  TRADE  43 

9.  "Protection  is  a  bulwark  of  national  strength  in  time  of  war." 
"Free  trade  leads  to  a  differentiation  of  functions  between  nations 
that  acts  as  an  insurance  against  war."    Which  argument  is  true  ? 

10.  "Protection  broadens  and  enriches  our  social  life  by  diversi- 
fying our  industrial  system.  It  is  an  insurance  against  the  cultural 
monotony  which  free  trade  fosters."   What  validity  has  this  argument? 

11.  "Protection  must  be  as  broad  as  the  American  principle  of 
democracy.  Let  us  not  aristocratically  protect  a  few  favored  indus- 
tries, for  instance,  sugar,  steel,  and  rubber.  Let  us  show  our  American 
spirit  by  placing  duties  upon  all  articles  of  import,  and  by  this  means 
let  us  enable  every  manufacturer,  every  farmer,  every  merchant,  and 
every  laborer  throughout  this  fair  land  of  ours,  to  receive  a  larger 
income  and  to  enjoy  a  larger  amount  of  the  good  things  of  life  than 
he  could  were  his  industry  not  smiled  upon  by  the  beneficent  r^ys  of 
protection."  Can  it  give  to  all  more  of  "the  good  things  of  life"? 
This  argument  might  be  called  "  boot-strap  aviation."    Why  ? 

A 

40.    The  Influence  of  the  Tariff  on  Wages 

A.  The  various  influences  exerted  by  the  tariff  on  wages  are 
implicit  in  the  discussions  of  the  arguments  for  free  trade  and  pro- 
tection. However,  because  of  the  importance  of  the  wages  question 
in  practical  tariff  controversy,  the  more  important  of  them  require 
separate  presentation. 

B.  134,  135,  152,  153. 

C.  I.  What  contradictions  do  you  find  in  the  wages  arguments 
of  the  protectionists  of  1824  and  1901  ?  2.  Under  what  conditions 
does  protection  lower  the  rate  of  wages?  3.  Does  it  lower  wages  by 
decreasing  the  price  of  labor  or  increasing  the  prices  of  goods  ?  4.  If 
protection  leads  to  the  formation  of  new  capital,  what  effect  does  it 
have  upon  wages  ? 

D.  I.  "In  America  the  wages  of  labor  are  so  high  that  one 
cannot  make  enough  in  manufacturing  to  pay  them  without  protec- 
tion." "In  America  the  high  wages  enjoyed  by  labor  are  due  to  the 
high  protective  tariff."  Point  out  the  contradictions  between  these 
arguments.    Which  is  valid  ? 

2.  "Advocates  of  free  trade  assert  that  protection  forces  labor 
to  work  against  nature  rather  than  with  it.  If  this  be  so,  to  obtain  a 
given  result  a  larger  amount  of  labor  will  be  demanded  under  protec- 
tion than  under  free  trade.  But,  just  because  of  this  increased  demand 
wages  will  be  higher  than  under  free  trade."  Would  wages  be  higher 
if  all  land  were  stony  ?  if  laborers  were  forced  to  work  with  one  hand 
tied  back  of  them?  Point  out  the  fallacy  in  the  use  of  the  term 
"demand"  above. 


44  CURRENT  ECONOMIC  PROBLEMS 

3.  "Wages  are  determined  by  the  marginal  productivity  of  labor 
within  the  economic  entity.  According^,  if  two  nations  freely  ex- 
change commodities  with  each  other,  the  poorest  opportunity  for 
labor  utihzed  in  either  of  the  nations  will  fix  the  rate  of  wages.  What, 
then,  must  be  the  consequences  of  a  free  exchange  of  goods  between 
the  United  States  and  China?"  What  confusion  underHes  this 
^argument  ? 

4.  ''The  standard  of  living  of  American  laborers  is  the  highest  in 
the  world.  The  American  wage,  therefore,  must  be  the  highest  paid 
anywhere.  But  since  American  entrepreneurs  are  forced  to  pay  high 
wages,  they  must  be  allowed  to  sell  their  goods  at  high  prices.  To 
do  this  they  must  receive  the  benefits  of  protection."  Point  out  the 
fallacies  underlying  this  argument. 

5.,  "Under  free  trade  natural  resources  are  used  most  advanta- 
geously. Consequently  the  marginal  productivity  of  labor  is  kept 
highest.  It  follows,  therefore,  that  wages  must  be  at  a  maximum." 
Is  this  sound  ? 

6.  "Under  protection  the  amount  of  capital  is  constantly  being 
increased.  Consequently  the  marginal  productivity  of  labor  is  con- 
stantly being  raised.  It  follows,  therefore,  that  wages  must  be  .at  a 
maximum."    Is  this  sound  ? 

41.    The  Historical  Setting  of  the  Current  Tariff  Problem 

A.  The  examination  of  the  conflicting  theories  of  free  trade  and 
protection  which  we  have  just  made  is  necessary  to  an  appreciation 
of  the  issues  involved  in  the  current  tariff  problem.  But,  since  we 
are  not  free  to  start  our  national  experience  anew,  we  are  confronted 
by  no  simple  alternative  of  free  trade  or  protection.  We  are  called 
upon  rather  to  modify  a  highly  complex  and  established  tariff  system. 
This  problem  calls  for  an  understanding  that  can  be  obtained  only 
by  inquiring  how  our  tariff  system  has  become  what  it  is. 

B.  General  Introduction,  Part  2,  54,  233,  238. 

C.  I.  What  part  has  protection  played  in  the  industrialization 
of  America?  2.  What  forces  were  behind  the  Morrill  tariff  act? 
What  impress  has  it  left  upon  our  tariff  policy  ?  3.  Account  for  the 
dominance  of  the  idea  of  protection  in  the  last  part  of  the  nineteenth 
century.    4.  State  as  accurately  as  you  can  the  current  tariff  problem. 

D.  I.  "During  the  Civil  War  the  adoption  of  a  comprehensive 
system  of  internal  revenue  taxation  forced  the  adoption  of  very  high 
import  duties."  Explain.  After  the  war  what  changes  were  made  in 
the  system  of  internal  revenue  taxation?  customs  duties?  What 
were  the  consequences  ? 

2.  "The  development  of  American  manufacturing  upon  a  large 
scale  was  contingent  upon  either  high  prices  for  manufactured  goods 


PROBLEMS  OF  INTERNATIONAL  TRADE.  45 

or  an  adequate  supply  of  low-priced  labor.  Protection  offered  a 
fulfilment  of  the  first  condition;  the  open  door  to  immigrants  of  the 
second.'^  Which  was  chosen?  Show  as  fully  as  you  can  the  com- 
plementary nature  of  the  two  policies. 

3.  "  Because  of  a  difference  in  circumstances  the  identical  interests 
which  in  England  have  favored  free  trade  have  thrust  the  policy  of 
protection  upon  the  United  States."    How  can  this  be  ? 

4.  "In  the  future  the  struggle  over  the  tariff  will  be  less  a  matter 
of  sectional  issues,  less  a  matter  of  contrary  economic  theories,  and 
more  a  phase  of  the  great  struggle  between  democracy  and  privilege" 
(Brown).    What  does  the  author  mean  ?    Do  you  agree  ? ' 

5.  "  For  some  time  it  has  been  evident  that  the  future  of  American 
industry  lies  overseas.  The  European  war  has  at  last  demonstrated 
that  fact  beyond  peradventure."  If  so,  what  changes  in  attitude 
toward  conflicting  theories  of  the  tariff  may  we  expect  from  different 
industrial  groups?  What  effects  may  we  expect  this  to  have  on 
our  tariff  policy  ? 

42.    The  Argument  from  Experience 

A.  A  historical  approach  to  the  current  tariff  problem  involves 
of  necessity  a  study  of  the  ''argument  from  experience."  In  addition 
to  the  light  which  it  throws  upon  the  present  situation,  such  a  study 
has  the  added  advantage  of  revealing  the  very  large  number  of  inter- 
related antecedents  in  terms  of  which  a  "result"  is  to  be  explained. 
It  is  thus,  incidentally,  an  object-lesson  in  economic  causation. 

C.  I.  Analogous  arguments  show  that  prosperity  is  due  to 
protection  and  to  free  trade.  Explain  the  mystery.  2.  Is  American 
prosperity  due  to  national  protection  or  to  free  trade  between  the 
states?  3.  What  logical  method  underlies  the  "arguments  from 
experience"  ?    Is  it  valid ? 

D.  I.  "With  protection  has  come  prosperity;  protection  is, 
therefore,  the  cause  of  prosperity."  "With  an  increase  in  the  number 
of  suicides  has  come  increased  prosperity;  suicides  are,  therefore,  the 
cause  of  prosperity."    Which  argument  is  the  more  valid  ? 

2.  "America  has  been  endowed  with  such  rich  stores  of  natural 
resources  that  not  even  the  protective  tariff  could  prevent  unbounded 
prosperity."  Is  this  argliment  usually  advanced?  Why  not?  Is 
it  more  or  less  valid  than  that  in  the  first  quotation  in  the  preceding 
question  ? 

3.  "Free- trade  tariffs  in  America  have  inevitably  been  followed 
by  depressions."  What  historical  instances  are  usually  cited  in 
support  of  this  argument?  Were  the  tariffs  to  which  depressions 
were  attributed  free-trade  tariffs?    Is  the  chronology  of  legislation 


46      .    CURRENT  ECONOMIC  PROBLEMS 

and  depression  correctiy  stated  ?    What  Historical  evidence  is  rejected 
in  reaching  the  above  conclusion  ? 

4.  Present  a  valid  argument  leading  to  the  conclusion  that 
protection  has  played  an  important  part  in  the  creation  of  our  "highly 
pecuniary,  industrial,  and  urban  culture." 

5.  ''With  complementary  factors,  protection  has  induced  a  gigan- 
tic, clumsy,  and  feverish  development  of  manufacturing  and  mining; 
it  has  induced  the  inevitable  attendants  of  this  growth,  urban  life, 
city  comforts,  slums,  poverty,  vice;  greater  concentration  of  wealth, 
and  class  differences;  a  medley  of  races  and  a  babel  of  tongues;  a 
clash  of  political  and  ethical  systems;  an  impotence  to  direct  social 
development;  and  an  overutilization  of  natural  resources."  Has 
protection  caused  development  to  proceed  at  too  fast  or  too  slow"  a 
pace?  Has  it  imposed  a  disproportionate  share  of  the  costs  upon 
the  present  or  upon  future  generations  ?  Have  its  results  been  worth 
their  cost  ? 

43.     The  Impracticable  Nature  of  Protectioh 

A.  To  become  real  the  theory  of  free  trade  or  of  protection  must 
be  embodied  in  tariff  schedules  by  Congress.  Too  frequently  it  is 
forgotten  that  Congress  is  not  an  accurate  mechanism  for  translating 
policy  into  law.  Hence  the  viewpoint,  interests,  and  methods  of  the 
legislative  body  in  themselves  impart  to  tariff  legislation  many  of  its 
most  salient  characteristics. 

B.  137,  140,  144,  147. 

C.  I .  What  technical  knowledge  is  necessary  to  an  understanding 
of  tariff  schedules?  2.  The  very  nature  of  a  tariff  bill  suggests  that 
legislation  is  subject  to  what  abuses?  3.  How  is  the  evidence  upon 
which  a  tariff  bill  is  based  collected  and  digested  ?  4.  What  impress 
is  bicameral,  committee,  and  conference  action  likely  to  leave  upon  a 
tariff  bill  ?  5.  Upon  what  logical  principle  are  the  conflicting  interests 
of  various  sections  and  industries  reconciled  ?  6.  Mention  character- 
istic tricks  of  tariff -making.  7.  Why  was  the  selection  upon  "Tariff 
for  Politics  Only"  included  in  the  readings ?  8.  In  view  of  the  habit 
of  tariff  tinkering  by  Congress,  can  protection  work  in  practice  ? 

D.  I.  Trace,  step  by  step,  the  course  of  a  tariff  bill,  from  the 
time  it  is  drawn  up  by  a  committee  of  the  lower  House  until  it  receives 
the  President's  signature.  To  what  principles  will  a  bill  drawn  in 
this  particular  way  conform  ? 

2.  Cite  concrete  evidence  from  the  Underwood-Simmons  bill 
supporting  the  conclusion  that  Congress  is  incapacitated  to  formulate 
tariff  legislation. 

3.  "The  tariff  is  a  local  issue."    How  can  this  be  ? 


PROBLEMS  OF  INTERNATIONAL  TRADE  47 

4.  ''The  popularity  of  protection  is  largely  due  to  the  opportunity 
which  it  gives  for  a  display  of  the  spirit  of  individual  acquisition." 
"The  protective  tariff  tends  to  the  dominance  of  the  entrepreneur 
viewpoint  in  politics."  Explain  the  two  statements.  Are  they 
connected  ? 

5.  "Protection  is  all  right  in  theory,  but  it  will  not  work  in 
practice."    Prove  this  proposition. 

44.    The  Scientific  Revision  of  the  Tariff 

A.  Our  present  tariff  system  aims  consistently  neither  at  pro- 
tection nor  at  revenue.  Nor,  for  the  immediate  future,  is  eithep 
objective  likely  to  disappear  completely.  However,  protection  is 
likely  to  become  less  prominent,  owing  to  the  demand  for  markets 
"overseas,"  accentuated  by  the  new,  but  dimly  perceived,  industrial 
conditions  produced  by  the  European  conflict.  It  is  more  than 
possible,  too,  that  the  persistent  demand  for  taking  the  tariff  "out 
of  politics"  will  find  at  least  partial  realization. 

B.  158, 159. 

C.  I.  How  does  a  discussion  of  the  tariff  happen  to  involve  a 
discussion  of  labor  costs?  2.  What  influence  is  a  tariff  based  on 
difference  in  "costs"  likely  to  have  upon  the  development  of  foreign 
trade?  of  domestic  £rade?  3.  Can  costs  be  determined  accurately 
enough  to  serve  as  a  basis  for  duties?  4.  What  advantages  and 
disadvantages  has  a  "  tariff  board"  over  Congress  for  tariff  legislation  ? 

D.  I.  "To  accept  differences  in  costs  of  production  as  a  basis 
for  tariff  legislation  is  definitely  to  accept  a  policy  of  protection." 
Why  so  ? 

2.  "If  the  principle  of  differences  in  costs  as  a  basis  for  duties 
is  consistently  carried  out,  it  must  have  for  its  objective  national  self- 
sufficiency."    Why? 

3.  Can  one  who  favors  basing  tariff  duties  on  differences  in  costs 
of  production  consistently  vote  for  an  appropriation  for  building  an 
interoceanic  canal,  the  object  of  which  is  to  lower  transportation 
charges  ? 

4.  What  is  the  importance  of  making  a  distinction  between  the 
rate  of  wages  per  day  and  the  labor  cost  per  unit  of  product  ?  Men- 
tion other  details  of  accounting  which  need  consideration  in  any 
intelligent  discussion  of  a  tariff  based  upon  "costs." 

5.  "No  true  protectionist  can  favor  a  'scientific'  tariff.  To  place 
the  protected  manufacturer  in  a  position  in  which  he  can  make  no 
more  than  in  an  unprotected  industry  neutralizes  the  advantages 
to  be  obtained  from  protection."  Develop  this  argument  in  the 
light  of  "the  case  for  protection."    Is  it  valid? 


VII.    THE  PROBLEM  OF  RAILWAY  REGULATION 
45.    The  Fundamental  Factors  in  the  Problem 

A.  For  many  years  past  the  American  people  have  been  con- 
stantly confronted  with  the  problem  of  railway  regulation.  The 
persistence  of  the  problem  has  been  equaled  only  by  its  changing  and 
ever  bewildering  appearance.  Each  attempt  to  dispose  of  it  seems 
ftnly  to  have  led  to  complications.  In  its  development — for  develop- 
ment it  has  had,  rather  than  solution — the  dominant  theory  of  the 
relation  of  the  state  to  industry  has  been  of  little  importance.  Its 
history  has  been  very  largely  determined  by  the  economic  character- 
istics of  the  railway  industry.  "With  these,  therefore,  it  is  best  to 
begin  our  study. 

C.  I.  What  functions  are  performed  by  the  transportation  sys- 
tem in  the  "organization  of  industrial  society?  2.  Is  the  magnitude 
of  American  railway  interests  a  matter  that  is  germane  to  a  considera- 
tion of  the  problem  of  railway  regulation?  3.  What  is  the  economic 
importance  of  "the  dual  nature"  of  the  railway  corporation? 
4.  What  problems  are  associated  with  the  monopbUstic  character  of  the 
industry  ?  5.  What  problems  grow  out  of  "joint  costs"  and  "  dimin- 
ishing costs"?  6.  Why  cannot  competition  be  depended  upon  to 
preserve  a  proper  balance  between  the  interests  of  the  corporation 
and  those  of  the  public  ? 

D.  I.  "It  has  been  through  the  application  of  the  machine 
process  to  transportation  that  society  has  been  organized  upon  a 
pecuniary  basis  into  a  single  comprehensive  entity."  Write  a  short 
historical  sketch  showing  the  part  that  transportation  has  played 
in  the  creation  of  the  present  economic  order. 

2.  "A  stable  organization  of  society  upon  a  pecuniary  basis 
requires  stabihty  and  cheapness  in  transportation  charges."  Can 
this  prime  essential  to  economic  order  be  secured  under  competition  ? 
Why  is  it  an  essential  ? 

3.  Show  by  a  hypothetical  calculation  which  approximates  the 
real  facts  how  a  10  per  cent  increase  in  traffic  may  increase  the  profits 
of  a  railway  corporation  200  per  cent  or  more. 

4.  Why  should  you  expect  the  problem  of  ^'laissez-faire  versus 
social  control  in  America"  to  manifest  itself  first  of  all  in  connection 
with  the  transportation  problem  ? 

5.  "Because  the  railway  business  is  subject  to  the  two  economic 
principles  of  'diminishing  costs'  and  'joint  costs'  it  is  necessarily  a 

48 


THE  PROBLEM  OF  RAILWAY  REGULATION  49 

monopoly."  Show  how,  from  this,  there  arise,  inevitably,  the  prob- 
lems of  protecting  the  public  against  the  railroads  and  the  railroads 
against  the  public. 

46.     Discriminatory  Practices  of  the  Railroads 

A.  In  the  economic  characteristics  of  the  railway  industry  just 
studied,  discriminations  have  their  chief  source.  Their  presence 
constitutes  the  first  clearly  defined  railway  problem.  Its  importance 
lies,  not  so  much  in  the  effects  of  discriminations  upon  the  railroads, 
as  in  their  tendency  to  abridge  opportunity  and  to  create  monopoly 
in  the  general  industrial  field,  thus  interfering  with  the  competitive 
organization  of  society  upon  a  pecuniary  basis. 

B.  209-12. 

C.  I.  How  does  the  very  nature  of  the  railroad  industry  force 
the  traflSc  manager  to  secure  additional  business  by  rate  concessions  ? 
2.  Enumerate  and  illustrate  the  early  forms  of  discrimination;  the 
later  forms.  Account  for  the  differences.  3.  How  can  discriminations 
affect  the  economic  interests  of  corporations  ?  of  regions?  4.  Wherein 
do  discriminations  present  an  economic  problem?  5.  How  can  dis- 
crimination in  all  its  forms  be  extirpated  ? 

D.  I.  If  the  traffic  of  a  railroad  moves  largely  in  a  single  direc- 
tion, is  the  railroad  justified  in  offering  to  carry  freight  in  the  opposite 
direction  at  a  lower  rate  ? 

2.  ''It  is  often  quite  profitable  to  charge  a  favored  shipper  a  rate 
less  than  one  which,  if  universally  applied,  would  cause  the  railroad 
to  carry  on  its  business  at  a  loss."    How  can  this  be  ? 

3.  ''Discriminations  find  their  exclusive  source  in  the  eonomic 
characteristics  of  the  railway  industry."  "Because  of  the  possibility, 
of  easily  acquiring  and  disposing  of  shares  of  stock,  either  in  railway 
or  industrial  concerns,  of  owning  interests  in  companies  selling  sup- 
plies to  or  shipping  over  the  raihoad,  and  of  speculating  in  real  estate, 
railway  officials  are  under  the  strongest  pressure  to  grant  rebates." 
Which  theory  of  discriminations  is  true  ? 

4.  "Railway  discriminations  prevent  competition  from  playing 
its  part  in  organizing  industrial  society.  They  result  in  encroach- 
ments upon  the  interests  of  the  non-favored  shipper  and  of  the  public." 
Explain  in  detail. 

5.  "Under  a  system  of  non-interference  by  the  government,  the 
railroads  are  at  the  mercy  of  large  shippers.  Government  regulation 
is  necessary  to  put  them  in  a  position  to  stop  giving  discriminations." 
How  can  this  be  ? 

6.  Just  what  range  of  powers  must  the  government  assume,  if 
it  is  to  stop  discrimination  in  all  its  forms  ?    If  the  problem  is  thus 


50         CURRENT  ECONOMIC  PROBLEMS 

solved,  will  that  be  the  end  of  the  matter,  or  will  the  very  solution 
have  left  a  new  railway  problem  in  place  of  the  old  ? 


47.     The  Nature  and  Extent  of  Regulation 

A.  It  is  interesting  to  trace  how,  in  an  attempt  to  reach  the 
manageable  elements  in  the  railway  industry,  the  administrative 
powers  of  the  government  have  Uttle  by  httle  been  increased.  It  is 
interesting  to  note  that  with  each  increase  in  powers,  the  ultimate 
factors  have  escaped,  calling  for  a  new  increase.  Thus  the  problem 
of  railway  regulation  has  constantly  reappeared  in  new  forms  and 
with  increased  complexity. 

B.  60-63. 

C.  I.  How  many  of  the  complaints  made  against  the  railway 
system  in  1886 yare  valid  today?  2.  What  particular  problems  led 
to  the  granting  of  the  powers  to  the  Interstate  Commerce  Commission 
whose    provisions    are    separately    enumerated    in    the    readings? 

3.  What  particular  powers  were  conferred  in  each  of  these  grants? 

4.  Is  the  record  of  the  extension  of  governmental  authority  over  the 
railroads  complete  ? 

D.  I.  Is  the  problem  of  the  regulation  of  the  raihoads  in  any 
way  complicated  by  the  "di\dsion  of  sovereignty"  between  the 
federal  and  the  state  governments  ? 

2.  Enumerate  the  aspects  of  regulation  which  you  regard  as 
infringements  of  the  principle  of  freedom  of  contract.  How  are  such 
infringements  to  be  explained? 

3.  By  concrete  examples  show  how  unregulated  railway  rates 
may  be  made  to  absorb  a  surplus  yielded  by  a  protective  duty;  to 
yield  a  protection  not  afforded  by  the  tariff;  to  neutrahze  the  effect 
of  a  protective  duty. 

4.  ''Roughly  speaking,  the  history  of  the  relation  of  the  govern- 
ment to  the  railroads  can  be  divided  into  a  period  of  favors  antedating 
1870  and  a  period  of  restriction  following  that  date."  Why  did  the 
change  in  attitude  come  at  that  time  ? 

5.  Explain  how  it  came  about  that  the  Interstate  Commerce 
Commission  was  given  power  to  prescribe  and  supervise  the  accounting 
systems  of  the  railroads.  Of  what  significance  is  this  grant  of  power 
in  the  development  of  the  railway  problem  ? 

6.  Write  a  short  essay  showing,  step  by  step,  the  occasions 
and  the  results  of  the  extension  of  the  power  of  the  government 
over  the  railways.  What  title  is  most  appropriate  to  such  an 
essay  ? 


THE  PROBLEM  OF  RAILWAY  REGULATION  51 

48.  Aspects  of  Rate-Making 

A.  The  question  of  rates  is  th^  epitome  of  all  railway  problems. 
The  interests  of  competing  shippers  are  involved  in  particular  rates. 
The  interests  of  shippers  as  a  group  and  of  the  public,  on  one  hand, 
and  the  railroads,  on  the  other,  converge  upon  the  schedule  of  rates 
as  a  whole.  The  former  is  an  aspect  of  the  problem  of  industrial 
opportunity  and  the  competitive  organization  of  society.  The  second 
involves  the  problem  of  the  railway  as  a  monopoly.  The  importance 
of  these  problems  necessitates  a  consideration  of  the  theory  of  rate- 
making. 

B.  207,  208. 

C.  I.  Why  do  all  railway  problems  converge  in  the  question  of 
rate-making?  2.  Of  what  economic  importance  is  the  complicated 
technique  of  rate-making?  3.  What  part  has  competition  in  the 
making  of  particular  rates?  of  schedules  as  a  whole?  4.  What  is 
the  correct  theory  of  the  particular  rate  ?  of  the  schedule  as  a  whole  ? 
5.  Make  a  careful  appraisal  of  the  rate  theory  of  the  Interstate 
Commerce  Commission. 

D.  I.  Can  the  problem  of  the  proper  regulation  of  schedules  of 
rates,  as  distinct  from  particular  rates,  be  adequately  dealt  with  so 
long  as  authority  over  rates  is  divided  between  the  federal  and  the 
state  governments  ?  so  long  as  the  groups  of  railroads  over  which  as 
units  shipments  are  carried  remain  independent  corporations  ? 

2.  Is  the  principle' of  ''charging  what  the  traffic  will  bear"  ade- 
quate for  particular  rates  ?  for  schedules  ?  Is  the  principle  of  costs 
adequate  for  particular  rates  ?  for  schedules  ? 

3.  "The  schedule  of  rates  should  be  drawn  in  such  a  way  as  to 
result  in  such  goods  being  carried,  in  such  quantities,  and  for  such 
distances  as  will  yield  the  maximum  of  social  utility."  Explain  in 
detail  how,  on  this  principle,  a  schedule  of  rates  is  to  be  established  ? 

4.  Quite  recently  the  Interstate  Commerce  Commission  has  been 
called  upon  to  pass  upon  increases  in  whole  schedules  of  rates.  Com- 
pare the  problem  involved  in  such  a  decision  with  that  presented  in 
passing  upon  individual  rates.  By  allowing  general  increases  what 
principles  is  the  Commission  establishing  ? 

5.  Show,  by  a  short  historical  account,  how  the  problem  of  deter- 
mining the  general  schedule  of  rates  involves  the  problem  of  railroad 
valuation. 

49.     Valuation  of  the  Railroads 

A.  It  is  an  established  principle  that  in  prescribing  rates  a  fair 
return  must  be  allowed  on  the  investment.  The  question  of  rate- 
making,  particularly   of   whole   schedules,   involves,    therefore,   an 


52         CURRENT  ECONOMIC  PROBLEMS 

inquiry    into    the   proper  valuation  of   railroads  for  rate-making 
purposes. 

C.  I.  What  sequence  of  events  has  led  to  the  grant  of  power 
to  evaluate  the  railroads  of  the  country?  2.  Compare  the  respective 
merits  of  "market  value"  and  "physical  value"  as  the  basis  of  rates. 
3,  Why  may  we  regard  "franchise  value"  and  "land  value"  as  the 
real  points  at  issue  in  the  valuation  of  the  railroads  ?  4.  By  what 
theory  shall  the  value  of  railway  land  be  determined  ?  5.  Why  does 
the  valuation  of  railway  property  necessarily  begin  with  the  formu- 
lation of  a  theory?  6.  Formulate  an  adequate  theory  for  railway 
valuation. 

D.  I.  Railway  property  can  be  valuated  for  purposes  of  invest- 
ment, taxation,  or  rate-making.  Should  the  procedure  be  the  same 
in  the  three  cases  ? 

2.  "The  theory  of  physical  value  is  adequate  so  long  as  we  are 
dealing  with  buildings,  construction  work,  and  equipment.  It  is 
inadequate  as  a  basis  for  the  determination  of  land  and  franchise 
values."    Why  or  why  not  ? 

3.  "To  take  market  value  as  a  basis  of  rates  is  an  argument  in  a 
circle."  Why  ?  Is  it  arguing  in  a  circle  to  include  in  a  valuation  the 
land  at  its  value  to  the  railroad  ? 

4.  Does  the  interdependence  of  the  railway  systems  and  their 
schedules  of  rates  in  any  way  complicate  the  problem  of  railway 
valuation  ?  Is  the  problem  more  complicated  in  character,  or  merely 
of  greater  magnitude  than  that  involved  in  evaluating  municipal 
utilities  ? 

5.  Are  the  difficulties  in  valuation  merely  those  of  getting  the 
initial  values,  or  will  it  be  exceedingly  difficult  to  keep  values  up  to 
date?  Will  a  change  in  the  value  of  money  or  the  rate  of  interest 
affect  the  valuations  determined  by  the  Commission? 

6.  "Two  roads,  the  A.R.  &  Q.,  and  the  K.V.  &  W.,  connect  two 
cities.  The  former  runs  through  a  prosperous  section,  carrying  a 
large  amount  of  local  freight.  The  latter  traverses  a  mountainous 
region,  and  is  dependent  largely  upon  through  traffic.  The  initial 
cost  and  the  upkeep  of  the  latter  road  are  much  greater  than  those  of 
the  former.  The  Interstate  Commerce  Commission  is  called  upon 
to  determine  rates  between  the  two  cities."  Must  the  rate  be  the 
same  for  the  two  roads  ?  If  its  basis  is  cost  on  the  former  road,  what 
will  happen  to  the  latter  ?  if  cost  to  the  latter,  what  to  the  former  ? 
In  this  case  who  is  entitled  to  the  large  revenues  yielded  by  the 
former  road  ?  Is  it  certain  that  the  revenues  will  be  as  large  as  super- 
ficially might  be  expected  ?  What  has  this  case  to  do  with  the  practical 
problems  of  rate-making  ? 


THE  PROBLEM  OF  RAILWAY  REGULATION  53 

50.     Government  Ownership  of  Railroads 

A.  The  question  of  the  government  ownership  of  railroads  is  not 
before  the  American  people  as  an  expHcit  issue.  It  is,  however, 
impUcit  in  the  totality  of  conditions  which  characterize  the  develop- 
ment of  the  problem.  When  it  comes,  it  will  not  be  by  deliberate 
volition,  but  because  the  path  of  regulation  has  led  to  the  inevitable. 
But,  even  then,  an  end  of  the  problem  is  not  likely  to  be  attained; 
for,  under  government  ownership,  new  and  unusual  problems  of 
railway  regulation  are  sure  to  emerge. 

B.  221,  365,  370. 

C.  I.  Enumerate,  in  chronological  order,  the  powers  given  to 
governmental  authorities  over  railroads.  2.  What  further  grants 
of  power  are  implicit  in  the  ends  which  the  government  is  trying  to 
accomplish?  3.  Should  the  management  of  the  railroads  oppose 
government  ownership  ?  the  holders  of  railway  securities  ?  4.  Com- 
pare the  advantages  and  disadvantages  of  government  and  private 
ownership.  Are  they  commensurable?  Where  lies  the  balance? 
5.  If  the  balance  is  clearly  against  government  ownership,  does  that 
promise  an  escape?  6.  What  can  be  learned  from  a  study  of  the 
railway  problem  about  the  solution  of  economic  problems  in 
general  ? 

D.  I.  "The  prevention  of  discriminations  involves  allowing  the 
government  to  supervise  service,  claims,  and  purchases."  "To  allow 
the  roads  to  raise  rates  to  yield  a  fair  return  on  the  investment,  neces- 
sitates a  supervision  of  investments  by  the  government."  Why? 
Just  how  will  these  extensions  of  powers  bring  the  question  of  govern- 
ment ownership  to  the  front  ? 

2.  "If  regulation  fails,  the  public  will  demand  ownership;  if  it 
succeeds,  the  railroads  will  demand  it."  Is  this  dilemma  a  true 
explanation  of  the  situation  ? 

3.  "A  general  theory  is  being  developed  to  the  effect  that  the 
government  shall  guarantee  the  railroads  a  fair  return  on  a  reasonable 
investment,  and  that  it  shall  limit  them  to  a  fair  return.  The  realiza- 
tion of  this  policy  demands  a  manipulation  of  schedules  of  rates.  In 
view  of  highly  dynamic  industrial  conditions,  a  substitution  of  general 
for  particular  railway  securities  would  greatly  simplify  the  adminis- 
trative problem."    Explain  in  detail. 

4.  Draw  up  a  plan  by  which  the  United  States  Railway  Corpora- 
tion, a  private  concern,  acquires  the  property  of  the  several  railroads 
of  the  country. 

5.  Draw  up  a  plan  by  means  of  which  the  United  States  govern- 
ment may  acquire  ownership  of  the  railway  properties  of  the 
country. 


54         CURRENT  ECONOMIC  PROBLEMS 

6.  "Inasmuch  as  the  transition  to  government  ownership  involves 
a  substitution  of  government  bonds  for  railway  securities,  it  will 
amount  in  reality  to  a  change  in  management  rather  than  a  change 
in  ownership."    Do  you  agree  ? 

7.  Sketch  as  clearly  as  you  can  the  peculiar  railway  problems 
which  are  likely  to  appear  under  government  ownership.  Sketch  the 
larger  problems  into  which  current  railway  problems  are  likely  to 
be  merged. 


VIII.    THE  PROBLEM  OF  CAPITALISTIC  MONOPOLY 
51.    Is  Monopoly  Inevitable? 

A.  The  railway,  which  we  have  just  studied,  is  both  a  typical 
and  the  most  conspicuous  example  of  "natural"  monopoly.  Before 
addressing  ourselves  to  the  far  more  complicated  problem  of  "capi- 
talistic" monopoly,  it  is  well  to  try  to  obtain  some  idea  of  the  age, 
the  bewildering  forms,  and  the  extreme  complexity  of  the  monopoly 
problem.  This  can  be  done  by  raising  the  question  of  the  inevitability 
of  monopoly. 

B.  15,  174,  175,  361. 

C.  I.  How  long  has  the  monopoly  problem  been  with  us  ?  Has 
it  always  been  the  same  problem  ?  2.  Account  for  the  persistence  of 
the  protest  against  monopoly.  3.  List  and  classify  all  the  forms  of 
monopoly  of  which  you  know.  4.  Make  a  clear  distinction  between 
monopoly  and  large-scale  production.  5.  Is  there  a  real  antithesis 
between  the  "natural"  and  the  "artificial"  explanations  of  monopoly  ? 

D.  I.  " Typical  examples  of  monopoly  are  corners,  rings,  patents 
of  monopoly,  pools,  cartels,  trusts,  holding  companies, '  Gary  dinners,' 
interlocking  directorates,  'communities  of  interest,'  'gentlemen's 
agreements,'  closed  shops,  and  codes  of  'professional  ethics.'"  Ex- 
plain how  each  of  these  in  some  sense  or  other  may  be  regarded  as  a 
monopoly. 

2.  Would  you  classify  as  monopoly  profits  the  rent  of  land? 
royalties  from  mines  ?  patents?  copyrights?  the  wages  of  locomotive 
engineers?  the  salaries  of  corporation  officials?  the  honoraria  of 
opera  singers  ?    the  emoluments  of  college  professors  ? 

3.  "The  introduction  of  the  machine  necessitated  large-scale 
production.  Monopoly  is  merely  the  final  step  in  this  natural  process." 
If  the  argument  is  logical,  is  it  clear  that  monopoly  is  the  final  step  ? 
Is  the  distinction  between  the  business  and  the  industrial  unit  of  value 
in  appraising  the  above  argument  ? 

4.  "In  course  of  time  the  principle  of  economy  of  operation  will 
cause  each  industry  to  be  organized  as  a  monopoly;  then  combinations 
will  be  effected  between  the  monopolies  controlling  the  various  stages 
in  the  production  of  a  good;  finally  these  combinations  will  be  aggre- 
gated into  one  gigantic  industrial  concern  controlling  all  industries." 
"Large-scale  production  is  subject  to  the  law  of  diminishing  returns." 
Show  how  the  principle  just  quoted  can  be  made  to  dispose  of  the 
argument  above. 

55 


56  CURRENT  ECONOMIC  PROBLEMS 

52.     Conditions  of  Monopolization 

A.  If  we  hope  to  bring  monopoly  under  control  and  make  it 
play  its  proper  part  in  industrial  development,  we  must  understand 
its  fundamental  antecedents.  Accordingly  an  answer  to  the  ques- 
tion raised  in  the  last  section  calls  for  a  rather  detailed  study  of  the 
"conditions  of  monopolization." 

B.  loi,  169,  179. 

C.  I.  What  contributions  has  the  machine  technique  made  to 
monopoly?  2.  Connect  industrial  development  and  ''the  business 
cycle"  with  "the  failure  of  competition."  3.  Write  a  chapter  on 
"Incentives  to  Monopoly,"  for  a  book  on  the  trust  problem. 
4.  What  artificial  incentives  have  encouraged  the  formation  of 
monopolies?  5.  What  are  the  advantages  to  competing  concerns 
of  forming  combinations?  6.  What  advantages  and  disadvantages 
are  there  to  the  general  public  in  combination?  7.  Is  monopoly 
inevitable  ? 

D.  I.  "The  institution  of  capitalistic  monopoly  is  new;  its 
life-history^  is  not  as  yet  fully  revealed;  our  experience  is  limited; 
and  our  view  is  too  close  for  perspective.  Therefore  we  are  ill  pre- 
pared to  pass  upon  the  nature  of  monopoly."  Develop  this  argu- 
ment in  detail.  Do  you  accept  it  ?  Even  if  you  do,  does  it  justify 
a  laissez-faire  policy  relative  to  monopoly  ? 

2.  "The  introduction  and  extension  of  the  machine  process  and 
the  pecuniary  organization  of  society,  which  is  its  necessary  comple- 
ment, are  the  two  principal  antecedents  of  capitalistic  monopoly." 
Explain  this  argument.  Even  if  true,  does  it  follow  that  the  machine 
process  and  the  pecuniary  organization  of  society  are  inseparable 
from  monopoly? 

3.  "The  higher  the  rate  of  industrial  development,  the  greater 
the  tendency  toward  monopoly."    Prove  or  disprove. 

4.  "Peculiar  industrial  conditions  determine  that  in  one  line 
there  shall  be  monopoly  and  in  another  not.  Typical  of  these  are 
inelasticity  of  demand,  loss  of  identity  by  an  article  before  it  reaches 
the  consumer,  production  in  a  stage  of  increasing  returns,  the  possi- 
bility of  grading  an  article  to  appeal  to  different  social  classes,  and  the 
localization  of  the  supply  of  an  essential  raw  material."  Explain,  by 
concrete  examples,  how  these  conditions  have  contributed  to  the 
maintenance  of  various  monopolies. 

5.  "The  incentive  to  monopoly  is  financial.  Large  profits  are 
made  by  the  promoters  of  combinations.  In  addition  the  combina- 
tion has  a  value  higher  than  the  aggregate  of  the  values  of  the  separate 
establishments."  Explain  each  of  these  incentives.  Does  this 
argument  contradict  those  enumerated  abo\T  ? 


THE  PROBLEM  OF  CAPITALISTIC  MONOPOLY  57 

6.  "Monopoly  is  due  to  'artificial  conditions.'  Among  these  are 
'the  cencentration  of  cash,'  'the  restriction  of  credits,'  the  fickleness 
and  special  favors  of  the  tariff,  and  the  clever  rhanipulation  of 
railway  rates."  Explain  how  each  of  these  has  contributed  to  the 
maintenance  of  monopoly  in  particular  fields.  Which  of  them  do 
you  regard  as  general  "causes"  of  monopoly? 

7.  "Agreements  not  to  cut  prices  are  necessary  to  secure  the 
large  profits  made  possible  by  a  generous  protective  duty."    Why? 

8.  Enumerate  and  classify  the  conditions  of  monopolization. 
Weight  the  conditions  enumerated  according  to  their  importance. 

53.    The  Influence  of  Monopoly  on  Price 

A.  Price  is  the  immediate  point  of  contact  between  the  monopoly 
and  the  public.  Through  price,  too,  the  monopoly  produces  some 
of  its  most  important  industrial  effects,  such  as  the  restriction  of 
competition  and  the  concentration  of  the  control  of  production.  It 
is  natural,  therefore,  that  price  is  the  focus  of  the  more  immediate 
and  obvious  of  monopoly  problems. 

B.  76,  195. 

C.  I.  Show  by  a  schedule  of  your  own  how  monopoly  price  is 
usually  fixed.  2.  Is  monopoly  price  necessarily  higher  than  competi- 
tive price?  3.  Why  may  we  usually  expect  to  find  monopoly  price 
somewhat  lower  than  your  calculation  would  indicate  ?  4.  Explain, 
with  concrete  examples,  "class  price."  5.  Is  monopoly  price  likely 
to  vary  from  place  to  place  ? 

D.  I.  " The  greater  the  elasticity  of  the  demand  for  commodities 
controlled  by  monoJ)olies,  the  lower  will  be  the  price  that  yields  the 
maximum  profit."    Illustrate  by  the  use  of  schedules. 

2.  "Since  our  means  are  limited,  we  cannot  satisfy  all  our  wants. 
The  latter,  therefore,  compete  for  satisfaction.  This  causes  a  com- 
petition between  the  unlike  goods  which  satisfy  these  wants.  Accord- 
ingly, even  though  controlled  by  monopoHes,  the  prices  of  goods  are 
always  determined  under  competitive  conditions."  Defend  or  attack 
this  argument. 

3.  Why  are  goods  of  domestic  production  quite  frequently  sold 
abroad  cheaper  than  at  home  ?  Is  monopoly  a  necessary  antecedent 
to  such  differences  in  prices  ? 

4.  Should  producers  be  given  the  power  to  determine  the  prices 
at  which  retailers  may  dispose  of  their  goods  ?  What  is  the  practical 
importance  of  this  problem  of  "the  maintenance  of  prices"  ? 

5.  "The  Caesars  and  Napoleons  are  no  longer  found  on  the 
tented  field,  but  in  the  gilded  palaces  of  finance.  One  week  a  rail- 
road magnate  gives  a  milHon  dollars  to  a  hospital,  and  the  next  the 


58  CURRENT  ECONOMIC  PROBLEMS 

Interstate  Commerce  Commission  is  applied  to  for  permission  to 
raise  rates  lo  per  cent,  thus  threatening  an  increased  cost  of  living, 
bringing  with  it  increased  poverty  and  misery  in  a  million  homes," 
Point  out  the  fallacy. 

54.    Types  of  Unfair  Competition 

A.  If  unrestrained,  industrial,  like  railway,  corporations  are 
prone  to  resort  to  ''unfair"  methods  of  securing  business.  These 
tend  to  disturb  relative  competitive  advantages,  to  foster  monopoly, 
and  to  interfere  with  the  competitive  organization  of  industry  upon 
a  pecuniary  basis. 

-B.     74,  169,  177,  180. 

C.  I.  Classify  the  types  of  "unfair"  competition  mentioned  in 
the  readings.  2.  Show,  by  examples,  the  relation  of  the  nature  of  the 
industry  to  the  types  of  unfair  competition  used.  3.  Enumerate 
the  economic  incentives  to  unfair  competition,  4.  By  what  ethical 
standards  are  the  practices  mentioned  pronounced  ''unfair"?  Are 
these  standards  to  be  accepted  ? 

D.  I.  Make  a  careful  and  detailed  contrast  between  the  incen- 
tives to  railway  discrimination  and  to  "  unfair  "  industrial  competition. 
Make  a  similar  contrast  between  the  results  of  the  two. 

2.  "The  ultimate  objective  of  unfair  methods  of  competition  is 
monopoly."    Explain. 

3.  "The  unfair  methods  once  used  by  the  great  corporations  were 
an  expression  of  the  contemporary  spirit  of  extreme  individualism 
in  business.  They  were  an  inevitable  complement  of  the  social  phi- 
losophy of  a  generation  ago."  Are  such  methods  a  thing  of  the  past  ? 
What  problems  in  ethics  does  this  quotation  raise  ? 

4.  "The  competition  of  industrial  establishments,  of  which  'un- 
fair' practices  are  but  a  superficial  manifestation,  vindicates  itself  in 
concentrating  the  industrial  property  of  the  country  in  the  hands 
of  those  best  fitted  to  manage  it.  It  has  the  incidental  advantage  of 
encouraging  the  formation  of  large  aggregates  of  new  capital."  Give 
the  argument  leading  up  to  each  of  these  conclusions.  Ar.e  they 
valid  ? 

5.  "The  theory  of  the  state  has  been  that  industrial  justice  to  the 
conflicting  interests  of  producers  and  consumers,  as  well  as  to  rival 
producers  and  rival  consumers,  inheres  in  a  scheme  of  prices  estab- 
lished under  competition.  The  presence  of  monopoly,  therefore, 
interferes  with  distributive  industrial  justice."  Explain  in  detail 
this  "legal  presumption."  Show  the  seriousness  of  the  ethical  and 
legal  problems  which  follow  the  imperfect  action  of  competition  as 
an  organizing  force. 


THE  PROBLEM  OF  CAPITALISTIC  MONOPOLY  59 

55.  The  Government  and  Monopoly 

A.  To  suppress  or  control  monopoly,  we  have,  of  course,  placed 
our  primary  reliance  in  the  government.  The  history  of  its  attempts 
is  marked  by  two  principal  characteristics:  first,  a  policy  aiming  at 
the  restoration  of  competition  and  a  determination  of  its  plane; 
secondly,  the  reappearance  of  the  problem  in  new  guise^  after  each 
attempt  at  solution. 

B.  181-85,  195. 

C.  I .  Show,  by  examples,  the  value  which  a  change  in  the  form 
of  business  combination  has  in  eluding  the  law.  2.  Is  this  process  of 
change  of  form  at  an  end  ?  3.  What  was  the  intent  of  the  Sherman 
act?  4.  Is  the  theory  underlying  it  sound?  5.  Enumerate  its  most 
important  provisions.  6.  Appraise  the  efficacy  of  its  mechanism  in 
the  light  of  the  dissolution  of  the  Standard  Oil  Company.  7.  What 
was  the  occasion  for  the  Trade  Commission  and  Clayton  acts? 
8.  Will  their  enforcement  provide  a  satisfactory  solution  of  the  trust 
problem  ? 

D.  I.  "The  contest  between  law  and  combination,  manifested 
in  changing  forms  of  organization,  has  resulted  in  a  reduction  of  the 
problem  of  monopoly  to  its  lowest  terms,  and  a  clear  statement  of 
the  issue  involved."    State  the  issue  as  clearly  as  you  can. 

2.  ''The  history  of  trust  legislation  represents  an  attempt  to 
restore  competition  and  to  regulate  its  plane."  Which  object  is 
dominant  in  the  Sherman  act?  the  Trade  Commission  act?  the 
Clayton  act? 

3.  Defend  or  attack  the  justice  of  the  ''threefold  damage"  clause 
of  the  Sherman  act. 

4.  Write  an  argument  defending  or  attacking  the  Supreme  Court 
for  writing  the  word  "reasonable"  into  the  Sherman  act. 

5.  Present,  as  clearly  as  you  can,  the  issues  involved  in  the 
antithetical  proposals  of  the  regulation  of  monopoly  and  the  regu- 
lation of  competition. 

56.  The  Social  Problem  of  Monopoly 

A.  The  monopoly  problem  has  usually  been  considered  only  in 
its  more  immediate  aspects.  As  a  result  there  has  been  no  satisfactory 
accounting  of  the  relative  values  and  costs  of  monopoly  and  compe- 
tition. Equally  striking  is  a  failure  to  take  account  alike  of  the  more 
ultimate  results  to  which  the  antithetical  policies  may  lead  and  a 
disregard  of  the  larger  social  and  non-pecuniary  elements  involved 
in  the  problem. 

B.  74,  105,  195,  253,  364. 


6o         CURRENT  ECONOMIC  PROBLEMS 

C.  I.  What  are  the  costs  and  values  of  competition?  2.  What 
are  the  costs  of  regulated  monopoly?  What  are  its  social  values? 
3.  What  tendencies  would  competition  and  monopoly  severally  im- 
part to  the  development  of  industrial  society  ?  What  is  the  ultimate 
end  toward  which  each  aims  ?  4.  Outline  a  just  and  adequate  trust 
policy. 

D.  I.  "A  policy  of  regulated  monopoly  may  be  expected  even- 
tually to  lessen  the  rhythm  of  business  activity."    Support  or  attack. 

2.  *' Monopoly  removes  the  incentive  to  initiative,  displayed  alike 
in  personal  efficiency,  improved  organization,  and  advance  in  tech- 
nique." "Monopoly,  by  insuring  economic  security,  will  cause  the 
instinct  of  workmanship  to  take  the  place  now  occupied  by  the  spirit 
of  individual  acquisition."    Where  lies  the  truth  ? 

3.  "Even  if  it  be  true  that  in  certain  lines  of  production  the 
tendency  toward  concentration  is  too  strong  to  be  checked,  neverthe- 
less it  would  be  unsafe  for  the  government  to  lay  down  any  policy 
other  than  that  of  restoring  competition  and  determining  its  plane." 
Why  or  why  not  ? 

4.  Explain  the  result  that  monopoly  is  likely  to  have  upon  the 
stratification  of  society,  the  concentration  of  wealth,  the  distribution 
of  industrial  opportunity,  the  relative  size  of  incomes,  the  nature  of 
educational  advance,  the  realization  of  political  democracy,  the  nature 
of  social  development.  What  have  these,  and  kindred  questions,  to 
do  with  the  monopoly  problem  ? 

5.  "  The  matter  at  issue  is  a  question,  less  of  the  relative  'economy' 
of  monopoly  and  competition  than  of  the  kind  of  economic  organiza- 
tion best  calculated  to  give  us  the  kind  of  society  we  want"  (Young). 
Explain  fully.  Show  the  connection  of  this  with  other  problems  which 
we  have  discussed  or  are  going  to  discuss.  Can  the  monopoly 
problem  be  solved  in  isolation,  or  must  it  be  considered  as  a  part 
of  a  social  program  ? 


IX.    THE  PROBLEMS  OF  POPULATION 
57.     The  Question  of  Numbers 

A.  Quite  different  in  character,  yet  intimately  associated  with 
the  problems  of  economic  organization  just  considered,  are  those 
which  have  to  do  with  the  welfare  of  the  classes  which  make  up  the 
''economic  order."  Of  these  the  most  obvious  and  the  most  funda- 
mental is  the  problem  of  population.  It  is  well  to  begin  our  study 
of  this  subject  with  the  "problem  of  quantity"  stated  in  its  simplest 
terms. 

C.  I.  With  what  other  economic  and  social  problems  is  the 
question  of  population  directly  and  indirectly  concerned?  2.  Show 
the  fundamental  dependence  of  general  and  class  welfare  upon  the 
ratio  of  population  to  resources.  3.  Account  for  the  early  appraisals 
of  population  given  in  the  readings.  4.  Explain  the  changing  value 
placed  upon  a  large  population  in  America. 

D.  I.  Which  of  the  following  can  be  explained  in  terms  of  the 
ratio  of  population  to  economic  resources:  the  exodus  from  Eden? 
the  attempt  of  #ie  Helvetians  to  move  out  of  their  boundaries  into  the 
Roman  province  ?  the  invasion  of  England  by  the  Angles,  Jutes,  and 
Saxons  ?  the  practice  of  infanticide  among  certain  primitive  peoples  ? 
the  survival  of  polyandry  in  Thibet  ? 

2.  "Some  of  the  most  important  crises  in  social  development 
have  been  associated  with  a  sudden  change  in  the  ratio  of  population 
to  resources.  Among  these  may  be  mentioned  the  Black  Death, 
which  reduced  population;  the  economic  discovery  of  America,  which 
increased  resources;  and  the  Industrial  Revolution,  which  through 
a  superior  technique  practically  increased  resources."  Explain  the 
significance  of  each  of  these  changes. 

3.  Give  a  rational  explanation  of  the  high  value  set  upon  a  large 
population  by  the  writers  of  the  Old  Testament.  Is  there  any  con- 
firmation of  this  explanation  in  recent  events  in  Europe  ? 

4.  "Children  may  be  to  their  parents  either  assets  or  liabilities." 
On  this  basis  explain  the  changing  American  attitude  toward  a  large 
population. 

5.  "Children  are  the  property  of  the  poor."  Does  this  explain 
the  attitude  of  the  industrial  class  toward  the  size  of  the  family. 
How  are  the  attitudes  of  the  leisure,  business,  and  professional  classes 
to  be  explained  ? 

61 


62         CURRENT  ECONOMIC  PROBLEMS 

6.  The  law  of  population  and  the  law  of  diminishing  returns 
have  together  given  to  economics  the  title  of  ''the  dism^-l  science." 
Why? 

^  58.     The  Malthusian  Theory 

A.  The  quantitative  theory  of  population  is  inseparably 
associated  with  the  name  of  Malthus.  A  clear  understanding  of  it 
necessitates  attention  to  its  original  statement,  its  criticism,  its 
development,  and  its  presence  in  current  economic  problems. 

B.  36,  45,  233,  375. 

C.  I .  Is  there  any  essential  connection  between  the  social  crisis 
of  his  day  and  Malthus'  theory  of  population?  2.  State  and  criti- 
cize the  theory  of  population  as  stated  by  Malthus.  3.  Has  the  rate 
at  which  population  increases  anything  to  do  with  the  validity  of  the 
principle?  4.  Distinguish  between  the  teachings  of  Malthus,  the 
Malthusians,  and  the  neo-Malthusians,  5.  In  what  proposal  does 
neo-Malthusianism  find  its  most  conspicuous  current  expression? 
6.  What  current  arguments  associate  Malthusianism  with  capitalism  ? 

D.  I .  "  In  the  animal  world  the  usual  condition  is  an  equilibrium 
between  numbers  and  food-supply."  ''Human  history  has  been 
marked  by  a  succession  of  planes,  on  each  of  which  there  was  for  a 
time  a  tendency  toward  an  equilibrium  between  population  and 
economic  resources."  Explain  each  statement.  Wh^  is  the  expres- 
sion "a  succession  of  planes"  used  in  the  second  ? 

2.  According  to  the  most  reliable  evidence,  the  population  of 
England  at  various  dates  has  been  as  follows:  1086,  2,000,000;  1348, 
4,000,000;  1377,  2,000,000;  1700,  5,500,000;  1750,  6,467,000;  1770, 
7,428,000;  1790,  8,675,000;  181 1,  10,164,000;  1861,  20,066,000; 
1891,  29,900,000;  1901,  32,527,000;  and  191 1,  34,045,000.  Explain 
the  changes  in  population  indicated  by  these  figures.  Account  for 
the  rapid  increase  in  population  in  modem  England. 

3.  Compare  the  work  of  Malthus  with  that  of  Darwin  in  method, 
in  conclusions,  in  attitude  toward  social  reform,  and  in  influence 
upon  social  reform.  Which,  if  either,  is  animated  the  more  by  the 
spirit  of  laissez-faire? 

4.  "Each  mouth  that  is  brought  into  the  world  brings  two  hands 
with  which  to  fill  it."    Does  this  annihilate  the  Malthusian  theory? 

5.  "During  the  nineteenth  century  population  increased  at  an 
unprecedented  rate.  Yet,  at  its  close,  the  standard  of  living  was 
higher  than  ever  before."  Does  this  prove  the  non-operation  of  the 
law  during  this  century? 

6.  "The  standard  of  living  is  the  result,  not  of  one,  but  of  many, 
causally  independent  factors.  Among  these  are  the  quantity  of 
natural  resources,  the  changes  in  the  volume  of  capital,  the  develop- 


THE  PROBLEMS  OF  POPULATION  63 

ment  of  technology,  and  the  changes  in  population.  These  cannot 
be  reduced  to  a  single  economic  formula.  It  is  accordingly  best  to 
regard  the  law  of  population  simply  as  the  tendency  of  numbers 
to  increase."    Justify  this  statement  of  the  law. 

7.  "Since  man  is  a  rational  beiiig,  the  very  statement  of  the 
Malthusian  theory  was  one  cause  of  the  defeat  of  its  own  prophecies." 
State  the  newer  "volitional"  theory  of  population  (Hobhouse). 

8.  "If  population  is  not  uniformly  checked  by  all  classes,  it  is 
necessary  that  we  have  a  stratified  .society,  based  on  property  and 
inheritance.  That  alone  will  save  the  privileged  classes  from  the 
penury  and  woe  which,  without  stratification,  would  be  the  lot  of  all." 
What  validity  has  this  argument?  What  relevancy  has  it  to  the 
proposition  to  adopt  socialism? 

9.  "Differences  in  the  fates  of  increase  within  the  several  social 
classes  of  a  country  are  more  significant  than  differences  in  the  rates 
of  increase  in  different  countries."  What  social  problems  does  the 
former  affect  ?    the  latter  ? 

59.    The  Coming  of  the  Immigrant 

A.  At  present  the  question  of  the  quantitative  control  of  popu- 
lation appears  in  two  problems,  that  of  "birth-control"  and  that  of 
immigration.  The  former  is  largely  a  matter  of  voluntary  social 
conventions,  the  latter  of  governmental  action.  Each  can  be  made 
a  reflection  of  the  social  judgment  as  to  the  quantity  of  population. 
The  issue,  however,  in  connection  with  the  former  is  likely  to  be  lost 
in  considerations  of  individual  welfare;  and  in  the  case  of  the  latter 
to  be  confused  by  the  introduction  of  ethnic,  religious,  political,  and 
cultural  questions. 

B.  39,  57. 

C.  I.  What  significance  does  the  fall  in  the  native  birth-rate 
give  to  the  problem  of  immigration?  2.  What  is  your  reaction  to 
the  account  of  the  "immigrant  invasion"?  3.  What  importance 
attaches  to  the  rate  of  immigration?  4.  Of  what  value  are  the 
American  appraisals  of  immigration?  5.  State  the  quantitative 
problem  of  population  as  implicit  in  the  immigration  problem. 

D.  I.  To  the  proposal  to  equalize  property  as  a  means  of 
abolishing  poverty  Aristotle  interposed  the  objection  that  it  would 
prove  unworkable  unless  the  state  exercised  a  control  over  the  growth 
in  numbers.  What  must  have  been  his  line  of  argument  ?  What 
relevancy  has  it  to  current  problems  ? 

2.  "  Population  should  increase  more  slowly  than  natural  resources 
and  technical  advance  if  progress  is  to  be  made."  Apply  this  to  the 
immigration  question. 


64  CURRENT  ECONOMIC  PROBLEMS 

3.  "The  principal  incentive  to  migration  is  differences  in  wages 
and  standards  of  living."  Why  has  immigration  from  Northern 
Europe  to  the  United  States  practically  ceased  ?  Why  do  our  immi- 
grants come  so  largely  from  Southern  Europe  ?  May  we  expect  such 
immigration  to  cease  in  course  of  time  ?    Explain. 

4.  '^  Presently  the  world  will  be  cut  up  with  immigration  barriers 
which  will  never  be  leveled  until  the  intelligent  accommodation  of 
numbers  to  resources  has  practically  equalized  population  pressure 
all  over  the  globe"  (Ross).  Is  this  prediction  likely  to  be  realized  in 
the  immediate  future  ? 

5.  *'One  needs  but  compare  population  pressure  in  various  coun- 
tries today  to  realize  that  the  real  enemy  of  the  dove  of  peace  is  not 
the  eagle  of  pride  or  the  vulture  of  greed  but  the  stork"  (Ross). 
Argue  for  or  against  population  pressure  as  the  primary  incentive 
to  war. 

6.  "  Social  policy  demands  an  increase  in  population;  the  interests 
of  native  Americans  is  best  served  through  race  suicide.  The  neces- 
sary result  of  this  antithesis  is  a  peopling  of  America  with  foreign 
stocks."  How  is  the  antithesis  to  be  solved  otherwise  ?  Is  it  a  real 
antithesis  ? 

60.     Immigration  and  Industrial  Development 

A.  The  increase  in  the  number  of  laborers  through  immigration 
has  been  one  of  the  complementary  conditions  which  together  have 
produced  our  highly  pecuniary,  industrial,  and  urban  culture.  This 
culture,  in  its  manifold  aspects,  would  have  been  impossible  but  for 
immigration. 

B.  61,  161,  Introduction  to  VI,  255. 

C.  I.  Enumerate  and  appraise  our  industrial  debts  to  the 
immigrant.  2.  In  our  industrial  development  why  may  protection 
and  the  open  door  to  the  immigrant  be  looked  upon  as  complementary 
forces?  3.  Enumerate  other  factors  which  have  contributed  to  the 
result.  4.  Can  responsibiUty  be  quantitatively  apportioned  among 
these  factors?  5.  On  the  whole  has  immigration  contributed  a  net 
value  or  a  net  cost  to  American  culture  ? 

D.  I.  "The  protective  tariff  creates  a  demand  for  certain  kinds 
of  labor  at  the  same  time  that  it  destroys  the  demand  for  certain 
kinds  of  foreign  goods"  (Hall).  Do  you  know  of  a.  concrete  case 
where  it  has  furnished  this  incentive  to  immigration  ? 

2.  "The  nature  of  our  expanding  industrial  system,  especially 
the  use  of  machinery,  has  determined  to  a  large  extent  the  character 
of  the  immigrants  whom  we  have  received."  Explain,  citing  concrete 
evidence. 


THE  PROBLEMS  OF  POPULATION  65 

3.  "'Birds  of  passage'  perform  the  highly  important  function  of 
adjusting  our  labor  supply  to  our  labor  needs."    Is  this  sound? 

4.  "Immigration  has  brought  us  a  body  of  adult  laborers.  Thus 
the  expenses  of  the  years  of  dependence  have  been  borne  by  foreign 
countries.    We  receive  the  net  benefits."    Do  you  agree  ? 

5.  "Immigration  has  contributed  greatly  to  our  prosperity  by 
supplying  us  with  a  multitude  of  goods  at  very  cheap  prices." 
Explain. 

6.  Answer  for  immigration  the  questions  asked  about  protection 
in  problem  5  in  section  42,  above. 

7.  "Immigration  has  encouraged  a  dense  population  congested 
in  cities  and  crowded  in  factories  and  mines.  But  is  it  certain  that 
it  is  a  more  ideal  social  aggregation  than  a  community  of  prosperous 
farmers?"  (Fetter). 

61.     Immigration  and  Labor  Conditions 

A.  The  fact  of  immigration  is  written  large  in  every  aspect  of 
our  industrial  society.  The  problem  of  immigration  bears  directly 
or  indirectly  upon  all  our  social  problems.  Yet  its  most  immediate 
and  direct  connection  is  with  the  working  conditions,  wages,  and 
standards  of  life  of  our  industrial  laborers. 

B.  27,  255,  273. 

C.  I.  Is  immigration  the  cause  of  the  disappearance  of  the  ideal 
living  conditions  enumerated  by  Dickens?  2.  Make  a  careful  study 
and  write  a  criticism  of  the  logic  underlying  the  conclusions  in  235 
and  236.  3.  Has  immigration  forced  the  native  worker  up,  down,  or 
out?  4.  Show,  quite  explicitly,  how  immigration  has  affected  some 
four  or  five  industrial  conditions.  5.  If  the  door  be  kept  open  to 
immigrants,  can  unionism  thrive?  6.  Has  the  immigrant  been  to 
the  native  laborer  a  help,  a  goad,  or  a  menace  ? 

D.  I .  "Immigrants,  being  mobile  and  migratory,  aid  in  adjusting 
the  supply  of  labor  to  the  actual  demand,  thus  lessening  the  rhythm 
of  business  activity."  "The  immigrant  invasion  has  caused  a  larger 
and  larger  part  of  the  labor  force  of  the  country  to  be  invested  in  the 
production  of  goods,  the  demand  for  which  is  precarious,  thus  accen- 
tuating the  rhythm  of  business  activity."    Where  lies  the  truth  ? 

2.  "Immigrants  settle  in  the  cities,  thus  disturbing  the  balance 
between  urban  and  rural  industry.  Maldistribution  of  labor,  rather 
than  immigration,  is  responsible  for  low  wages,  unemployment,  and 
the  extreme  rhythm  in  business  activity."    Do  you  agree? 

3.  "Like  machinery,  the  immigrants  have  relieved  native  laborers 
of  heavy  and  disagreeable  toil,  and  have  elevated  them  to  an  aristoc- 
racy of  labor."    Is  the  analogy  correct  ? 

\ 


66         CURRENT  ECONOMIC  PROBLEMS 

4.  ''Immigration  has  not  increased  the  American  population.  It 
has  merely  resulted  in  a  substitution  of  alien  for  native  stock."  Has 
immigration  increased  the  total  population?  Has  it  lowered  the 
native  birth-rate? 

5.  "A  careful  statistical  study  of  immigration  and  wages  in  the 
last  few  years  shows  that  immigration  has  raised  wages."  ''Because 
of  their  lower  living  standards  immigrants  will  accept  wages  far 
lower  than  natives.  Thus  immigration  lowers  wages."  Show  the 
incorrectness  of  both  of  these  arguments. 

6.  "So  long  as  a  cheap  and  seemingly  limitless  labor  market  lies 
open,  it  is  impossible  to  standardize  working  and  living  conditions." 
Why  or  why  not  ? 

7.  "Let  thi  foreigners  come  in!  No  American  laborer  need  fear 
the  competition  of  a  laborer  from  any  part  of  the  world.  In  any 
line  of  work  the  American  is  a  match  for  a  man  of  any  other  nation." 
Admitting  the  truth  of  the  last  statement,  may  it  still  be  to  the 
laborer's  advantage  to  exclude  the  foreigner  ? 

62.    The  Further  Restriction  of  Immigration 

A.  Inevitably  we  come  to  the  question  of  "what  are  we  going 
to  do  about"  immigration.  As  we  have  found,  the  quantitative  and 
the  qualitative  aspects  of  the  question  are  inseparable.  It  is  well, 
however,  to  consider  first  proposals  of  an  immediate  nature,  which 
grow  primarily  out  of  the  quantitative  aspects  of  the  problem. 

B.  231,  280. 

C.  I.  In  what  respect  does  immigration  present  a  problem 
because  of  numbers  ?  standards  of  living  ?  thrift  ?  2.  Why  do  most 
of  the  proposals  for  restriction  take  a  qualitative  form?  3.  State 
the  "pro  and  con"  of  the  literacy  test?  4.  Name  a  simple  test, 
easily  administered,  which  would  better  meet  the  requirement  of 
quantitative  restriction?  5.  Show  concretely  what  is  involved  in  an 
immigration  program. 

D.  I.  "Employers  favor  immigration  for  the  reason  that  they 
favor  large  families  among  the  poor.  They  favor  immigration  for 
the  reason  that  foxes  favor  large  families  among  rabbits."  Is  this 
fair  ?    Is  it  adequate  ? 

2.  Can  you  reconcile  a  "tariff  for  the  protection  of  American 
labor"  with  an  open  door  to  immigrants?  Why  do  those  who  favor 
the  first  policy  favor  the  second  ? 

3.  "Whether,  for  quantitative  reasons  immigration  should  or 
should  not  be  restricted,  depends  upon  whether  the  country  considered 
as  a  whole  is  in  a  stage  of  increasing  or  diminishing  returns."  Com- 
plete the  argument.    Is  it  as  simple  as  this  ? 


THE  PROBLEMS  OF  POPULATION  67 

4.  Discuss  the  merits  and  defects  of  the  plan  to  restrict  immigra- 
tion by  imposing  a  high  per  capita  tax  upon  the  immigrant. 

5.  "If  a  blanket  tax  of  $100  was  imposed  upon  each  immigrant 
with  the  privilege  accorded  him  of  going  to  any  place  in  the  country 
at  government  expense,  the  maldistribution  of  labor  would  be  righted 
and  the  immigration  problem  would  disappear. ' '    Are  you  so  sure  of  it  ? 

6.  "  One  of  our  most  distinguished  citizens  has  again  been  taking 
the  country  to  task  for  race  suicide.  Admitting  his  contention  that 
our  families  should  be  larger,  it  is  likely  that  a  prohibition  of  immi- 
gration would  achieve  the  end  he  has  in  view."  Trace  the  steps  by 
which  the  author  of  the  above  quotation  probably  arrived  at  his 
conclusion. 

7.  "Wages  might  be  raised  permanently  by  forcing  American 
employers  of  foreign  laborers  to  pay  them  a  minimum  wage  of  three 
dollars  per  day  during  their  first  ten  years  in  this  country.  This 
would  amount  virtually  to  a  protective  tariff  upon  American  labor." 
Discuss. 

63.    Immigration  and  Our  Future 

A.  The  qualitative  problem  of  immigration,  inseparably  asso- 
ciated with  that  which  we  have  just  studied,  contains  implicitly  all 
the  problems  of  our  social  order.  Properly  to  approach  it  we  must 
determine  the  kind  of  a  society  we  wish  to  produce  and  the  possible 
contributions  which  alien  stocks  can  make  to  that  culture.  Then  we 
must  formulate  a  program  which  will  secure  immigrants  from  proper 
stocks  and  in  proper  proportions  and  will  give  them  the  training 
necessary  to  enable  them  to  make  these  contributions.  Thus  the 
immigration  problem  loses  its  identity  in  that  of  the  conscious  control 
of  social  development. 

B.  Introduction  to  III,  54,  55. 

C.  I.  State  the  economic  problems  demanding  an  "immigration 
program."  2.  Can  the  economic  problems  of  immigration  be  con- 
sidered in  isolation?  3.  Has  the  "transitional  quality"  given  to  our 
social  order  by  the  immigrant  been  for  the  better  or  the  worse? 
4.  What  is  the  proper  place  for  the  immigrant  in  the  American 
culture  of  the  future  ? 

D.  I.  "The  question  at  issue  is  not  the  personal  or  racial 
characteristics  of  the  immigrants.  These  are  immaterial.  Personally, 
I  care  not  if  they  come  from  heaven  possessed  of  the  divine  attributes 
of  angels.  There  are  too  many  of  them."  Is  this  argument  apropos 
of  the  issue  ? 

2.  "Since  the  immigrants  are  eventually  to  constitute  an  indus- 
trial proletariat,  unrestricted  immigration  encourages  the  concen- 
tration of  wealth  and  the  stratification  of  society  on  a  pecuniary 


68         CURRENT  ECONOMIC  PROBLEMS 

basis."  *lf  cheap  labor  lowers  the  cost  of  production,  in  obedience 
to  the  laws  of  value  price  falls.  Thus  the  benefits  go  to  the  consumer. 
Immigration,  therefore,  can  encourage  neither  the  concentration  of 
wealth  nor  the  stratification  of  society  on  a  pecuniary  basis."  Which 
argument  is  sound  ? 

3.  Life  once  published  a  photogravure  of  a  frieze  supposed  to 
have  been  discovered  in  the  ruins  of  New  York  City  in  the  thirtieth 
centur}^  It  represented  an  American  Indian  denied  a  place  in  the 
sun  by  a  Dutch  trader;  the  Dutchman  removed  in  the  same  way  by 
an  Englishman;  the  EngHshman  by  a  Yankee;  the  Yankee  by  an 
Irishman;  and  the  Irishman  by  a  Hebrew.  At  this  point  the  frieze 
broke  off  abruptly.  Is  this  a  true  statement  of  the  law  of  racial 
survival? 

4.  ^'Because  all  property  eventually  comes  to  market  and  is 
knocked  down  to  the  highest  bidder,  and  because  disregard  of  con- 
ventional standards  of  expenditure  makes  a  capitalist  out  of  the 
immigrant,  the  economic  race  is  always  to  the  newcomer."  What 
evidence  have  you  of  the  displacement  of  "native  American'"  property 
owners  by  aliens?  Just  what  part  is  this  "law"  likely  to  play  in 
determining  the  future  of  the  immigrant  in  America  ? 

5.  "The  immigrant  must  remain  a  permanent  proletarian, for  he 
is  coming  too  fast  to  be  Americanized  by  our  machinery  for  assimila- 
tion." Does  this  statement  come  nearer  giving  a  picture  of  the 
immigrant's  future  than  that  above  ? 

6.  "Let  the  immigration  problem  alone.  In  God's  good  time  it 
will  settle  itself."    Show  that  this  is  true.    How  will  it  settle  itself? 

7.  "Immigration  has  induced  a  development  of  society  at  a 
faster  rate  than  we  could  control  it.  It  is  responsible  for  the  acute 
form  which  many  of  our  social  problems  take."  Give  concrete  evi- 
dence supporting  this  statement.  Will  a  solution  of  the  immigration 
problem  render  others  less  acute  ? 

8.  "The  real  problem  in  immigration  is  that  of  the  kind  of 
society  we  want  America  to  be."    Explain. 

9.  In  view  of  both  its  short-time  and  its  long-time  aspects,  formu- 
late an  adequate  immigration  program. 

64.    The  Quality  of  Population 

A.  The  problem  of  eugenics  involves  the  same  baffling  questions 
as  that  which  we  have  just  studied.  W^e  may  say  quite  positively 
that  certain  classes  should  be  inhibited  from  reproduction.  To  say 
what  classes  and  types  should  reproduce,  and  in  what  propor- 
tions to  each  other,  involves  the  formulation  of  a  comprehensive  and 
adequate  social  philosophy. 


THE  PROBLEMS  OF  POPULATION         69 

{ 

B.  37,  39,  248. 

C.  I.  Of  what  importance  is  it  to  society  to  control  the  birth- 
rates of  its  several  classes  ?  2 .  Is  reform  through  eugenics  antithetical 
to  reform  through  changes  in  social  environment  ?  through  education  ? 
3.  Can  the  biologist  produce  a  social  Utopia?  4.  What  effect  will 
immigration  have  upon  the  quality  of  our  population?  5.  Show 
that  the  problems  of  eugenics  are  social  rather  than  merely  biological. 

D.  I.  Enumerate  the  classes  or  types  which  unquestionably 
should  not  be  allowed  to  reproduce;  the  classes  or  types  about  which 
there  is  question.  Would  you  include  those  afflicted  with  tuberculosis 
in  the  first  class  ? 

2.  ''Eugenics  is  a  pseudo-reform  urged  by  conservatives,  who 
are  opposed  to  institutional  and  environmental  changes,  as  a  means 
of  countering  the  attack  of  radicalism."  Is  reform  to  be  effected  by 
changing  the  "environment"  or  improving  the  "population"  ?  How 
long  have  different  reformers  advocated  these  different  measures  ? 
Is  th^  charge  above  true  ? 

3.  At  present  we  have  many  social  conventions  and  inhibitions 
prescribing  the  conditions  of  marriage  in  the  upper  and  middle 
classes  in  society.  We  are  beginning  to  have  such  conventions 
relative  to  the  number  of  children.  Enumerate  these  conventions 
and  show  how  through  them  society  is  exercising  much  control  over 
its  population.  Can  similar  conventions  be  established  among  the 
industrial  workers  ? 

4.  "The  problem  of  positive  eugenics  turns  upon  the  question. 
For  what  are  we  breeding  ?  That,  in  turn,  is  based  upon  the  ques- 
tion, What  kind  of  a  society  are  we  trying  to  develop  ?"    Explain. 

5.  "However  smiling  the  gardens  of  Daphne,  they  had  always 
to  slope  down  into  the  huge  malodorous  quagmire  of  wretchedness" 
(Ross).  Is  inability  to  control  population  the  serpent  that  will 
forever  exclude  us  from  a  social  Eden  ? 


X.    THE  PROBLEMS  OF  ECONOMIC  INSECURITY 
65.    Insecurity  under  Modem  Industrialism 

A.  A  second  problem  which  has  to  do  primarily  with  the  welfare 
of  the  classes  which  make  up  society  is  that  of  economic  insecurity. 
Security  in  an  economic  sense  there  has  never  been,  but  the  problem 
of  modern  security  is  infinitely  complicated  by  the  manifold  aspects 
of  the  pecuniary  organization  of  society  in  which  it  has  its  being. 

B.  3,12,25,97. 

C.  I.  Compare  the  manorial  with  the  modern  industrial  system 
in  respect  to  economic  security.  2.  To  what  extent  is  insecurity  due 
to  competition?  to  the  perfection  and  extension  of  the  machine 
system?  3.  What  are  the  principal  manifestations  of  modern  inse- 
curity. 4.  Is  it  likely  that  the  problem  can  be  solved  through  an 
extensive  insurance  program  ? 

D.  T.  ''Mediaeval  insecurity  had  its  source  in  local  disasters, 
such  as  floods,  droughts,  and  raids.  The  organization  of  society  on 
a  personal  basis  caused  the  resulting  suffering  to  be  shared  by  the 
whole  group  rather  than  to  be  confined  to  particular  classes  or  indi- 
viduals." in  harmony  with  this  statement,  contrast  mediaeval  and 
modern  economic  security.  In  what  respects  is  the  foregoing  state- 
ment inaccurate  ? 

2.  "The  machine  system,  production  on  a  large  scale,  pecuniary 
competition,  dependence  on  distant  and  future  markets,  the  inter- 
locking scheme  of  prices,  the  violent  rhythm  of  the  economic  cycle, 
and  the  onward  rush  of  the  industrial  system  into  an  unknown  future 
prevent  one  from  knowing  what  is  in  store  on  the  economic  morrow." 
Connect  each  of  the  characteristics  of  the  industrial  system  mentioned 
with  the  problems  of  economic  insecurity. 

3.  "Because  of  the  delicate  pecuniary  organization  of  society  the 
consequences  of  a  failure  of  the  industrial  machine  at  one  point  are 
dissipated  through  the  whole  of  the  economic  order.  Thus  the 
burdens  of  economic  insecurity  are  much  smaller  than  they  would 
be  under  a  non-pecuniary  organization."  Develop  this  argument. 
Can  you  support  it  ? 

4.  "Under  our  system  economic  insecurity  is  the  lot  of  capital 
as  well  as  of  labor."    Explain. 

5.  "Industrial  insurance  is  no  solution  of  the  problems  of  eco- 
nomic insecurity.    It  substitutes  for  an  analysis  of  those  problems  an 

70 


THE  PROBLEMS  OF  ECONOMIC  INSECUXUTY  71 

accurate  accounting  of  industrial  risks;  for  an  attempt  at  solution 
an  endeavor  to  distribute  the  risks  with  the  minimum  of  burden." 
Explain  fully.    Do  you  agree  ? 

66.    Unemployment 

A.  The  most  conspicuous  manifestation  of  economic  insecurity 
is  unemployment.  The  name  is  used  to  denote,  not  a  single  problem, 
but  a  number  of  problems  unlike  in  all  respects  except  that  they  deal 
with  classes  or  types  of  labor  "out  of  jobs."  To  deal  intelligently 
with  the  problem  an  analysis  of  the  various  types  must  be  made,  the 
fundamental  sources  of  each  must  be  discovered,  and  means  must  be 
found  for  controlling  these.  In  its  entirety  the  problem  involves 
many  other  economic  problems  and  calls  for  an  elaborate  and  long- 
time program. 

B.  3,67,101,370. 

C.  I.  By  amending  Beveridge's  list  draw  up  a  classification  of 
the  types  of  unemployment.  2.  Determine  the  fundamental  con- 
ditions underlying  each  type.  3.  Unemployment  of  what  types  may 
be  lessened  by  the  establishment  of  labor  exchanges  ?  by  the  "  cyclical 
distribution"  of  government  orders?  4.  The  evils  incident  to  what 
t>^es  of  unemployment  can  be  minimized  by  insurance?  5.  Show 
the  obstacles  in  the  way  of  the  application  of  insurance  to  unemploy- 
ment.    Are  they  real  or  apparent  ? 

D.  I.  " Under  the  manorial  system  both  serf  and  lord  had  rights 
in  the  serf's  labor,  and  both  lord  and  serf  had  rights  in  the  lord's  land. 
Under  the  modern  system  all  rights  in  labor  have  been  concentrated 
in  the  laborer  and  all  private  rights  in  property  in  its  owner.  This 
change  in  property  rights  and  the  consequent  necessity  of  bringing 
labor  and  property  together  through  contract  have  much  to  do  with 
the  nature  of  modern  unemployment."    Explain  in  detail. 

2.  "Some  unemployment  is  due  to  the  friction  incident  to  the 
imperfect  organization  of  society  upon  a  pecuniary  basis."  What 
labor  markets  are  not  highly  organized  ?  What  is  the  most  obvious 
way  of  dealing  with  the  type  of  unemployment  suggested  here  ?      * 

3.  "The  determination  of  values  under  competitive  conditions 
may  be  depended  upon  to  protect  the  pecuniary  interest  of  those 
engaged  in  seasonal  occupations."  Does  it  render  full  protection? 
Does  it  solve  the  larger  problem  of  enabling  society  to  make  the 
best  use  of  its  available  labor  supply  ? 

4.  "The  volume  of  business  is  constantly  expanding  and  con- 
tracting. Labor  is  not  flexible  enough  to  make  an  immediate  response 
to  these  changes  in  the  volume  of  trade."    Explain  in  detail.-  What 


72         CURRENT  ECONOMIC  PROBLEMS 

labor  force,  for  this  country  at  least,  brings  about  a  partial  adjust- 
ment ?  With  what  larger  problem  is  the  problem  of  cyclical  unem- 
ployment merged? 

5.  May  the  problems  of  unemployment  be  expected  to  become 
less  acute  if  the  pecuniary  organization  of  society  is  perfected  ?  if 
the  rhythm  of  the  trade  cycle  is  lessened  ?  if  our  tariff  policy  becomes 
more  stable  ?  if  the  railroad  systems  are  brought  under  government 
ownership  ?  if  regulated  monopoly  displaces  competition  quite  exten- 
sively ?  if  the  volume  of  immigration  is  reduced  ?  if  the  government 
prescribes  conditions  of  employment  and  rates  of  wages  ?  if  collective 
bargaining  becomes  universal  ?  if  industrial  development  proceeds  at 
a  slower  rate  ?   if  society  adopts  socialism  ?   What  is  your  conclusion  ? 

67.    Industrial  Accident 

A.  The  problem  presented  in  industrial  accident  reveals,  not  only 
an  important  manifestation  of  economic  insecurity,  but  inability  of 
a  legal  system  established  under  a  tool  regime  to  deal  properly  with 
conditions  associated  with  the  machine  technique.  Its  solution 
involves  both  a  reduction  of  industrial  accident  to  a  minimum 
and  a  socially  equitable  distribution  of  the  costs  incident  to  industrial 
casualties. 

B.  30,49,330,331- 

C.  I.  What  can  be  done  to  reduce  industrial  accident  incident 
to  the  machine  process  to  a  minimum?  Who  can  do  it?  2.  Can 
individual  responsibihty  for  industrial  accident  be  determined? 
3.  State  and  criticize  the  *' theory  of  negligence"  as  a  means  for 
placing  the  incidence  of  work  accidents  where  it  belongs.  4.  What 
are  the  social  costs  of  allowing  the  incidence  of  work  accidents  to 
rest  with  injured  workmen  or  their  fellow-employees?  5.  Make  out 
a  case  for  or  against  the  necessity  of  employer's  liability. 

D.  I.  "Under  the  craft  system,  where  tool-methods  of  produc- 
tion were  used,  and  the  employees  were  few  in  number,  individual 
responsibility  for  accidents  could  be  directly  imputed,  and  the  theory 
of  neghgence  worked  substantial  justice."  Defend  this  statement, 
making  use  of  two  or  three  hypothetical  illustrations. 

2.  ''A  wheel  of  a  machine  in  a  factory  contains  a  defective  piece 
of  material.  Because  of  this  the  wheel  one  day  comes  off,  injuring 
the  workman  in  charge.  The  machine  has  been  properly  inspected 
by  state  officials."     Impute  individual  responsibihty  for  the  accident. 

3.  By  citing  three  or  four  illustrations  of  your  own,  show  the 
impossibiUty  of  applying  the  doctrine  of  "assumption  of  risk"  under 
modem  conditions. 


THE  PROBLEMS  OF  ECONOMIC  INSECURITY  73 

4.  If  "employer's  liability"  is  deemed  advisable,  should  the  law 
be  made  to  apply  to  miners,  factory  operatives,  machinists,  locomo- 
tive engineers,  drug  clerks,  errand  boys,  household  servants  ? 

5.  "Under  the  competitive  system  the  incidence  of  work  acci- 
dents, even  if  legally  assessed,  does  not  fall  upon  the  employer.  He 
adds  it  to  the  price  of  his  product  and  it  is  paid  by  the  consumer." 
Explain  in  detail.  Is  "employer's  liability"  merely  an  insurance 
scheme  ? 

68.     Sickness  and  Old  Age 

A.  Sickness,  incapacity,  and  old  age  are  incident  to  all  human 
life;  yet,  in  character,  in  quantity,  and  in  economic  meaning  they 
have  been  profoundly  affected  by  the  machine  process.  Together 
they  present  three  clearly  defined  problems:  first,  the  reduction  of 
"dependence"  through  "preventive  medicine"  and  the  "conservation 
of  human  resources";  secondly,  economic  adjustments  to  the  end  of 
making  employment  for  the  partially  disabled;  and  thirdly,  the 
equitable  distribution  of  the  incidence  of  dependence. 

B.  56,  57,  359,  360. 

C.  I.  Give  some  estimate  of  the  economic  cost  of  sickness;  of 
old-age  dependence.  2.  Sketch  a  program  which  will  result  in  greatly 
reducing  this  cost.  3.  Should  such  cost  as  is  left  be  borne  wholly  by 
the  individuals  affected?  4.  Can  the  British  national  insurance 
scheme  be  used  in  this  country  ?  5.  Is  the  pension  plan  the  one  best 
adapted  to  dealing  with  dependent  old  age  ? 

D.  I.  " Because  of  its  highly  specialized  nature  and  its  capacity 
to  utiUze  a  myriad  of  different  kinds  of  services,  modern  industrialism 
comes  much  nearer  than  any  other  system  to  providing  remunerative 
employment  for  the  partially  disabled."  Illustrate  with  examples 
from  personal  observation.  What  changes  in  the  industrial  system 
or  in  the  acquired  productive  powers  of  individuals  can  make  this 
provision  more  ample? 

2.  What  can  " preventive  medicine"  do  to  decrease  the  amount 
of  dependence?  immigration  laws?  eugenics?  child-labor  laws? 
compulsory  education?  a  broader  basis  for  vocational  education? 
Enumerate  other  agencies  which  can  be  used  in  the  program  to 
minimize  the  costs  of  dependence. 

3.  Provision  for  sickness  and  old-age  benefits  can  be  made  by  the 
state,  by  the  employer,  or  by  the  laborer  himself.  Give  the  argument 
for  and  against  each  scheme.  Draw  up  a  scheme  alike  practicable 
and  compatible  with  your  social  ideals. 

4.  "  Schemes,  such  as  these,  involving  compensation  for  industrial 
accidents,  sickness  benefits,  and  old-age  pensions,  strike  at  the  cardinal 
principle  of  our  civilization.    Self-control,  self-reliance,  self-provision, 


74         CURRENT  ECONOMIC  PROBLEMS 

and  self-respect  lie  at  the  basis  of  all  individual  freedom.  It  is  at 
these  things  that  such  socialistic  schemes  strike."  Is  the  point  well 
taken  ? 

5.  ''Provision  for  the  destitute  through  benefits  and  pensions 
makes  bad  matters  worse  by  taking  away  the  incentive  to  thrift." 
Do  you  agree  ? 

69.    The  Standard  of  Living 

A.  Because  its  upper  limit  is  determined  by  pecuniary  income, 
which  is  subject  to  all  the  caprice  of  the  market,  ''the  standard  of 
living"  is,  and  must  remain,  a  manifestation  of  economic  insecurity. 
It  has  for  us  the  added  interest  that  it  is  a  factor  of  prime  importance 
in  the  tariff,  immigration,  trade-union,  and  minimum-wage  problems. 

B.  156,  225,  228,  235,  239,  276,  292. 

C.  I .  What  is  the  economic  importance  of  the  standard  of  Uving  ? 
2.  Is  the  evidence  of  low  living-standards  indicative  of  faults  in  the 
economic  system  or  of  inefficiency  on  the  part  of  the  laborers  ?  3.  Is 
a  "fair  living  wage"  an  economic  or  an  ethical  concept? 

D.  I.  On  the  basis  of  the  prices  in  your  city,  determine  how  a 
family,  consisting  of  father,  mother,  and  a  child  of  eight,  should 
apportion  its  income  of  $450  a  year;  $900  a  year;  $3,500  a  year. 
After  drawing  up  the  three  budgets  compare  the  percentages  in  each 
spent  for  food,  rent,  clothing,  etc.    What  conclusions  do  you  draw  ? 

2.  "Immediately,  wages  determine  the  maximum  standard  of 
living  for  the  laboring  class;  ultimately,  the  standard  of  living  may 
determine  wages."    Explain  the  paradox. 

3.  "In  every  family  there  is  a  struggle  between  the  standard  of 
living,  savings,  and  unborn  children."  Explain.  Show  the  economic 
importance  of  the  alternative  solutions  of  the  problem  presented  in 
the  struggle  ? 

4.  Should  a  "fair  living  wage"  be  sufficient  to  support  one,  two, 
four,  six,  or  ten?  Should  it  be  able  to  yield  this  support  if  very 
economically  used,  if  spent  with  some  waste,  or  if  lavishly  used? 
Should  it  yield  the  bare  necessities  of  life,  certain  comforts  in  addi- 
tion, or  a  few  luxuries  in  addition  to  the  comforts  ?  What  are  neces- 
sities? comforts?  luxuries?  Is  a  "fair  living  wage"  a  scientific 
concept  ? 

70.    The  Minimum  Wage 

A.  Various  proposals  have  been  made  to  establish  higher  living 
standards  by  legally  raising  wages.  These  proposals  are  devious, 
one  modestly  limiting  itself  to  the  sweating  industries,  another  more 
broadly  to  "all  occupations  open  to  women,"  a  third  quite  hopefully 
to  "all  unskilled  labor  in  general,"  and  a  fourtli  boldly  proposing  "a 


THE  PROBLEMS  OF  ECONOMIC  INSECURITY  75 

schedule  of  minimum  rates  for  all  occupations  employing  manual 
labor."  They  are  alike,  however,  in  proposing,  directly  or  indirectly, 
the  substitution  of  an  "authoritative"  for  a  "competitive"  wage. 
This  section  can  do  nothing  more  than  indicate  the  larger  issues 
involved  in  these  proposals. 

B.  74,  180,  195,  221. 

C.  I.  What  economic  and  social  conditions  are  responsible  for 
minimum  wage  proposals?  2.  Enumerate  the  proposals,  analyze 
them,  and  state  the  issues  involved  in  each.  3.  What  legal  and  con- 
stitutional difficulties  impede  minimum- wage  legislation  ?  4.  Enumer- 
ate and  pass  judgment  upon  the  validity  of  the  economic  arguments 
urged  against  these  proposals.  5 .  Draw  up  a  minimum- wage  proposal, 
supplemented,  if  necessary,  by  other  proposals  necessary  to  make  it 
practicable  ? 

D.  I .  "  The  enactment  of  a  minimum  wage  for  unskilled  working 
women  would  in  all  probability  lead  to  one  or  more  of  the  following 
results:  numerous  and  varied  evasions  of  the  law;  substitution  of 
more  efficient  for  less  efficient  labor;  substitution  of  male  for  female 
labor;  an  increased  use  of  machinery;  a  rise  in  the  price  of  goods; 
and  an  increase  in  unemployment."  What  extension  of  government 
authority  would  be  necessary  to  prevent  failure  through  the  devices 
enumerated  ? 

2.  "Quite  likely  the  minimum  wage  would  increase  prices  of 
commodities.  Since  in  general  unskilled  labor  consumes  the  goods 
which  it  produces,  laborers  would,  in  the  end,  pay  in  increased  prices 
what  they  receive  in  increased  earnings."  What  is  the  weakness  in 
this  argument? 

3.  "In  connection  with  the  minimum  wage  the  question  of  'To 
whom  ?'  is  easily  disposed  of.  The  question  of  '  From  whom  ?'  is  fully 
as  important,  being  fraught  with  grave  consequences  to  society." 
Mention  several  sources  from  which  the  increase  in  wages  might  come. 
State  the  probable  consequences  of  taking  it  from  each  of  these 
sources. 

4.  "The  increased  wages  will  probably  come  from  the  parts  of 
the  incomes  of  capitalists  which  otherwise  would  be  saved.  Thus 
the  proposal,  by  threatening  to  decrease  capital,  threatens  still  lower 
competitive  wages  in  the  next  generation.  This  tendency  is  likely 
to  prove  cumulative."    Do  you  agree  ? 

5.  "Under  minimum  wage  laws,  rates  of  wages  will  soon  become 
established.  Their  very  inflexibiUty  will  be  a  serious  obstacle  in  the 
way  of  the  organization  of  a  society  as  dynamic  as  ours  upon  a  pecu- 
niary basis."    Explain  this  difficulty  in  detail.    Just  how  real  is  it  ? 

6.  "The  beneficial  results  of  a  minimum  wage  come  only  in  the 
less  immediate  future.    If  it  be  made  to  fix  an  ideal,  and  if  it  be 


76         CURRENT  ECONOMIC  PROBLEMS 

properly  supplemented  by  social  conventions  and  laws  designed  to 
decrease  the  number  of  laborers,  to  establish  higher  living  standards 
among  them,  and  to  increase  their  productive  efficiency,  it  may 
eventually  accomplish  all  of  its  objects."  Is  this  long-time  chance 
worth  taking?  Is  it  possible  that  without  it  the  other  proposals 
mentioned  might  accomplish  its  objects  ? 

71.     Compulsory  Arbitration  and  Wages 

A.  Compulsory  arbitration  is  best  treated  as  an  aspect  of  the 
minimum  wage;  for  it  involves  in  all  their  complexities  all  the  social 
and  economic  issues  which  find  expression  in  the  proposal  to  fix 
wages  authoritatively. 

B.  279,370,371. 

C.  I.  What  kind  of  a  minimum  wage  proposal  is  compulsory 
arbitration?  2.  Is  compulsory  arbitration  the  cause  of  the  increase 
ia  wages  in  New  Zealand  ?  3.  State  the  case  for  and  against  compul- 
sory arbitration.  4.  Could  compulsory  arbitration  be  made  to  work 
under  American  conditions  ? 

D.  I.  Is  it  inconsistent  to  try  to  maintain  wages  through  com- 
pulsory arbitration  and  to  keep  the  door  open  to  immigrants  ? 

2.  "The  problem  of  low  wages  can  be  solved  through  a  program 
consisting  of  compulsory  arbitration  and  a  minimum  wage  for  immi- 
grants."   Explain.    Do  you  agree? 

3.  ''For  an  arbitration  board  to  allow  its  employees  an  increase 
in  wages  because  of  the  large  profits  made  by  an  industrial  concern 
amounts  to  discrimination  against  similar  laborers  employed  in  con- 
cerns that  are  not  making  large  profits."    Explain.    Do  you  agree? 

4.  "The  determination  of  wages  by  particular  establishments  is 
out  of  harmony  with  the  pecuniary  organization  of  society.  The 
factors  which  must  be  taken  into  consideration  in  making  a  decision 
affecting  wages  far  transcend  the  evidence  which  any  particular 
establishment  can  furnish."  Make  this  argument  as  clear  and  as 
concrete  as  you  can. 

5.  Draw  up  a  list  of  all  the  factors  which  must  be  taken  into 
account  in  passing  upon  the  rate  of  wages  in  a  given  establishment. 
State  quite  specifically  the  criteria  by  means  of  which  the  justice  of 
the  rate  of  wages  can  be  determined. 


XI.    THE  PROBLEMS  OF  TRADE  UNIONISM 
72.     Group  and  Class  Consciousness 

A.  As  the  social  system,  incident  to  the  machine  culture,  becomes 
more  rigid,  the  workers  see  more  clearly  that  they  constitute  a  rela- 
tively permanent  proletariat.  There  develops  accordingly  a  feeling 
of  an  identity  of  interests  within  the  class,  or  the^roup,  and  of  a 
conflict  of  interests  between  classes  or  groups.  This  "class"  or 
"group"  consciousness  finds  its  chief  expression  in  attempts,  through 
"trade"  of  "industrial"  unions,  to  increase  the  welfare  of  the  class 
or  group.  The  problems  in  which  "class  consciousness"  is  a  factor 
embrace  the  whole  life  and  interests  of  the  worker. 

B.  25,  54,  132,  254. 

C.  I.  Account  for  the  slow  development, of  class  coosciousness 
in  America.  2.  In  what  essential  respects  are  the  interests  of  the 
"bourgeoisie"  and  the  "proletariat"  in  opposition  ?  3.  What  advan- 
tages to  the  worker  inhere  in  organization?  what  advantages  to 
society  in  the  organization  of  workers?  4.  Give  evidence  showing 
that  the  consciousness  which  hsls  developed  in  America  is  of  the 
group  rather  than  the  class. 

D.  I.  Fundamentally,  are  the  interests  of  laborers  of  the  same 
group  identical  ?  the  interests  of  different  groups  of  laborers  ?  the 
interests  of  capitalists  and  laborers  ? 

2.  "Codes  of  medical  and  legal  ethics  are  but  the  expression  of 
the  pecuniary  interests  of  the  groups  in  question."  Discuss,  citing 
examples.  Why  should  a  consciousness  of  the  identity  of  interests 
of  the  members  of  the  group  have  arisen  so  early  in  the  professions  ? 
Why  should  it  have  come  earlier  among  groups  of  skilled  than  among 
groups  of  unskilled  laborers  ? 

3.  "  Under  the  present  economic  order  the  laborer  and  the  capital- 
ist alike  gets  what  he  produces."  Under  the  present  system  does 
each  man  produce  an  individual  product  ?  Does  he  produce  a  definite 
part  of  a  joint  product  ?    How  can  you  tell  what  he  does  produce  ? 

4.  "Because  of  the  economic  necessity  resting  upon  the  owner  to 
protect  and  conserve  the  capital  which  he  has  invested  in  his  slave, 
the  system  of  chattel  slavery  made  far  better  provision  for  the  welfare 
of  the  laborer  than  does  that  of  wage-slavery."  Defend  or  attack 
this  statement. 

5.  *'The  desire  of  the  laborer  is  to  make  as  much  as  possible  out 
of  his  life  as  a  whole.    Since  under  the  wages  system  contracts  are 

77 


78         CURRENT  ECONOMIC  PROBLEMS 

for  short  periods,  the  employer  desires  to  get  as  much  as  possible  out 
of  the  laborer  during  the  legal  term  of  employment."  Does  unregu- 
lated competition  give  the  employer  any  alternative  ?  What  has  the 
open  door  to  immigrants  to  do  with  the  matter  ?  Is  the  antithesis 
stated  above  a  correct  one  ?  If  so,  in  what  problems  does  it  find 
expression  ? 

73.    The  Viewpoints  of  Laborer  and  Capitalist 

A.  The  activities  of  groups  of  laborers  and  capitalists  alike 
spring  from  judgments.  Now  judgments  are  premised,  not  so  much 
upon  real  interaets,  as  upon  conceptions  of  interests.  Accordingly,  to 
understand  aright  the  programs  of  industrial  groups  we  must  know 
somethmg  of  the  ''viewpoints"  of  those  responsible  for  them. 

B.  27,  52,  62,  251,  323,  324,  355. 

C.  I.  Is  "The  Sons  of  Martha"  an  accurate  expression  of  the 
viewpoint  of  class-conscious  labor?  2.  Criticize  Hoxie's  theory  of 
the  origin  of  the  viewpoints  of  the  capitalist  and  the  laborer.  3.  What 
distinction  do  you  notice  between  the  two  parts  into  which  almost 
every  article  of  the  ''economic  creed"  can  be  divided?  4.  Tabulate 
in  parallel  columns  the  particulars  in  which  the  viewpoints  of  laborers 
and  capitalists  differ. 

D.  I.  "If  the  theory  of  the  'types  of  unionism'  is  true,  there 
can  be  no  viewpoint  common  to  laborers."    Do  you  agree? 

2.  "Social  life  is  an  extremely  complex  thing.  One  belongs,  not 
to  a  single,  but  to  many,  different  groups.  In  America,  therefore, 
there  can  be  no  such  thing  as  a  group  or  a  class  viewpoint."  Illus- 
trate for  individuals  in  the  middle  class.  Does  the  conclusion  apply 
to  the  proletariat  ? 

3.  "Under  industrialism  our  scheme  of  conventions  and  inhibi- 
tions, legal  and  social,  has  as  its  objective  the  preservation  of  the 
pecuniary  interests  of  them  that  have."  How  can  laws  and  social 
conventions  reflect  class  interests  ?  Defend  or  attack  the  statement 
above. 

4.  "  Christianity  preaches  self-sacrifice,  content,  leaving  vengeance 
to  God,  and  patiently  waiting  for  a  reckoning  in  the  next  world.  Thus 
it  is  one  of  the  most  powerful  instruments  in  the  preservation  of  the 
capitalistic  system."    Show  that  there  can  be  nothing  in  this. 

5.  "True  partriotism  demands  absolute  loyalty  to  our  constitu- 
tion, our  legal  system,  and  our  established  and  tested  social  arrange- 
ments." Why  does  it?  What  condemnation  should  be  heaped  on 
the  laborer  because  of  his  stinted  loyalty  to  American  traditions  and 
institutions  ? 

6.  Why  do  employers  generally  talk  in  terms  of  national  and 
social  welfare  and  laborers  in  terms  of  group  and  class  welfare  ? 


THE  PROBLEMS  OF  TRADE  UNIONISM  79 

74.     Character  and  Purposes  of  Trade  Unions 

A.  Unions  there  are  in  infinite  variety,  serving  an  indefinite 
number  of  immediate  purposes.  Each,  however,  is  intent  upon  serving 
the  material  interests  of  the  group  composing  it,  and,  to  a  lesser  extent, 
those  of  organized  labor  as  a  body.  To  accomplish  this  object 
each  strives  to  build  up  a  spirit  of  group  solidarity  and  insists  strenu- 
ously upon  the  necessity  of  group  action. 

B.  12,  307. 

C.  I.  From  what  viewpoint  does  Eliot  pronounce  trade  unions 
undemocratic?  Are  his  strictures  justified?  2.  Does  Carnegie  leave 
a  place  for  a  very  vital  trade  union  ?  3.  Why  does  Mitchell  rest  his 
case  upon  the  necessity  of  collective  activity?  Do  you  agree  with 
him?  4.  What  is  your  reaction  to  each  of  the  three  views  here 
presented  ? 

D.  I.  "Individual  competition  may  be  depended  upon  to  secure 
justice  to  employer  and  employee  alike.  Therefore,  in  a  democracy 
there  is  no  place  for  a  union,  which  is  virtually  a  monopoly  of  labor." 
Develop  this  argument  in  detail.  What  assumptions  underlie  it? 
Do  you  accept  its  conclusion  as  a  valid  statement  of  social 
policy  ? 

2.  "Unionism  represents  a  vast  monopoly  of  skilled  labor  which 
waxes  fat  at  the  expense  of  unskilled  labor  and  the  general  public." 
Do  you  agree  ? 

3.  "One  of  the  greatest  obstacles  to  unionism  is  the  chance  which 
the  employer  has  to  disassociate  the  pecuniary  interests  of  union  leaders 
from  those  of  the  group  which  they  represent.  Judicious  promotions 
and  discharges,  as  well  as  more  sinister  methods,  may  be  used  to 
make  labor  leaders  favor  the  interests  of  employers."  Develop  this 
argument  in  detail,  citing  concrete  evidence  from  your  own  observa- 
tions.   How  can  unionism  guard  against  this  danger  ? 

4.  "Under  a  system  of  free  contract  it  is  hard  to  establish  a  spirit 
of  group  solidarity  so  long  as  the  ppen  door  to  immigrants  gives  a 
transitional  tendency  to  all  industry."    Explain. 

5.  "The  'hiring  and  firing  system'  aims  at  productive  efficiency 
at  the  expense  of  a  conservation  of  human  resources  and  a  realization 
of  the  fulness  of  life  by  the  laborer.  Unionism  aims  at  a  modification 
of  the  rigidity  of  the  system  to  give  a  larger  life  to  the  laborer."  Is 
this  a  correct  statement  of  the  aims  of  unionism  ? 

6.  "Unionism  aims  to  win  from  the  productive  demands  on  the 
laborer  enough  of  time  and  income  to  give  him  a  varied  consumption 
to  balance  the  monotony  of  his  productive  life."  Criticize  this  as  a 
statement  of  the  aim  of  unionism.  Present  a  substitute  statement 
which  you  regard  as  more  accurate. 


8o         CURRENT  ECONOMIC  PROBLEMS 

75.    The  Theory  of  Unionism 

A.  For  the  realization  of  its  ends  unionism  attempts  to  establish 
such  conditions  as  will  effectually  preserve  the  solidarity  of  the  group 
or  class  and  cause  it  to  act  as  a  unit.  The  epitome  of  union  theory  is 
the  "principle  of  uniformity,"  in  terms  of  which  all  union  conventions 
and  practices  find  their  expression. 

B.  48,  292,  324.  • 

C.  I.  Explain  the  meaning,  the  purpose,  and  the  miportance  of 
the  principle  of  uniformity.  2.  Explam  collective  bargaining,  the 
closed  shop,  control  of  technique,  and  control  of  apprentices  in 
terms  of  this  principle.  3.  Show,  by  concrete  examples,  the  value 
of  collective  bargaining  to  unionism.  4.  State  the  economic  argu- 
ments for  and  against  the  closed  shop.  5.  Is  the  closed  shop  ethically 
defensible  ? 

.  D.  I.  ''The  spirit  of  collective  activity  underlying  unionism  is 
antithetical  alike  to  our  individualistic  poUtical  and  legal  system  and 
our  pecuniary  organization  of  society."  Show  that  this  antithesis  is 
real.  What  fundamental  problems  does  it  involve?  What  other 
tendencies  or  proposals  considered  in  this  course  have  the  same  anti- 
indi\ddualistic  character  ? 

2.  "The  closed  shop,  finding  expression  in  a  complex  and  detailed 
ritual  as  to  technique,  workmen,  and  materials,  strikes  at  the  very 
root  of  productive  efficiency."  Cite  examples  showing  wastes  incident 
to  these  minute  rules.  Defend  or  attack  the  statement  above.  If 
the  statement  is  true,  is  there  any  defense  left  for  the  closed  shop  ? 

3.  "The  levymg  of  customs  duties,  the  exclusion  of  aliens,  the 
drawing  of  the  color  line,  and  the  admission  of  the  select  few  to  a 
sacred  social  circle  are  all  expressions  of  the  closed  shop."  Do  you 
agree  ?  Are  these  practices  defensible  ?  Point  out  examples  of  the 
"closed  shop"  practiced  by  capitalists.  On  what  gound  can  the 
closed  shop  be  defended  ? 

4.  "In  two  respects  unionism  strikes  at  the  very  basis  of  our 
civilization:  first,  by  insistence  upon  'uniformity'  in  wages,  it  denies 
to  the  talented  and  ambitious  man  a  chance  to  rise,  thus  discriminating 
in  favor  of  mediocrity;  and  second,  by  the  closed  shop,  it  denies  to  the 
non-union  man  his  God-given  right  to  make  a  living  for  himself  and 
his  family  by  working  at  his  trade."  Appraise  this  attack  upon 
unionism. 

5.  "The  ideal  institution,  calculated  to  preserve  the  rights  of 
unionist,  non-unionist,  employer,  and  public,  is  the  closed  shop  with 
the  open  union."   Is  such  a  thing  a  contradiction  in  terms  ? 

6.  "By  control  of  hiring  and  discharge,  the  technique  of  work- 
manship, and  the  condition  of  employment,  the  union  can  win  for 


THE  PROBLEMS  OF  TRADE  UNIONISM  8i 

its  members  economic  security.  By  collective  bargaining  it  can 
virtually  establish  the  prescribed  conditions  permanently.  Thus, 
within  the  law,  labor  can  win  back  the  equities  in  property  which  it 
possessed  under  the  manorial  system."  Under  what  conditions  can 
this  program  be  fulfilled  ?  Is  it  likely  to  be  fulfilled  ?  Would  a  reali- 
zation of  it  be  advantageous  to  union  laborers  ?  to  the  employers  ? 
to  the  public  ? 

76.    The  Weapons  of  Industrial  Conflict 

A.  The  realization  of  their  divergent  ends  involves  labor  unions 
and  employers  in  a  perpetual  "industrial  conflict."  Strikes  and 
lockouts  are  but  the  most  obvious  manifestations  of  this  struggle. 
The  unions  use  many  other  weapons  adapted  to  their  purposes,  and 
plan  short-time  amd  long-time  campaigns  with  consummate  strategy. 

B.  329,  333,  334,  33^- 

C.  I .  What  means  are  used  by  unions  to  secure  a  spirit  of  group 
solidarity?  Are  they  effective?  2.  What  "weapons"  are  used  to 
force  their  demands  upon  employers?  How  effective  is  each? 
3.  What  weapons  have  been  perfected  by  employers  for  resisting 
the  demands  of  the  laborers?  4.  What  prime  object  lies  back  of 
the  organization  of  "employers'  associations"?  5.  Account  for  the 
weakening  in  the  strategic  position  of  organized  labor  in  the  last 
ten  years. 

D.  I.  "The  employer  is  an  opponent  worth  fighting;  the  'scab' 
is  an  anti-social  traitor  who  has  no  rights  to  be  respected."  Why 
do  unions  find  it  necessary  to  encourage  such  feelings  against  scabs  ? 

2.  "Every  weapon  used  by  the  unions  finds  its  complement  in  a 
similar  weapon  used  by  the  employers."  What  is  the  complement  of 
the  strike  ?  the  boycott  ?  Show  instances  in  which  the  parallelism 
does  not  hold. 

3.  "The  boycott,  for  its  success,  depends  upon  publicity;  the 
blacklist,  upon  secrecy.  Therefore  the  conspiracy  laws  are  much  more 
easily  enforced  against  the  former  than  against  the  latter."  Explain 
in  detail. 

4.  Present  the  arguments  for  and  against  the  legalization  of  the 
boycott.    On  which  side  does  the  balance  lie  ? 

5.  "  The  sympathetic  strike  is  a  necessary  agency  in  the  realization " 
of  the  union  program."  What  objections  are  usually  advanced  against 
the  sympathetic  stike  ?  What  theory  underlies  the  argument  in  its 
favor  ? 

6.  "The  presence  of  large  increments  of  immigrant  labor  has 
robbed  some  of  the  most  powerful  union  weapons  of  their  efficiency." 
Explain  in  detail. 


82         CURRENT  ECONOMIC  PROBLEMS 

7.  *' Through  co-operation,  careful  study  of  the  problem,  and 
vigorous  action  employers'  associations  have  reduced  strike-breaking 
to  an  exact  science."  Explain  fully.  What  influence  has  this  had 
upon  the  strength  of  unionism?  upon  the  future  program  and 
activities  of  unionism  ? 

77.     Scientific  Management  and  Unionism 

A.  Scientific  management  is  one  of  the  most  spectacular  of 
recent  industrial  developments.  But,  for  our  purpose,  it  is  far  more 
important  that  it  is  a  point  of  conflict  at  which  converge  the  antithet- 
ical theories  underlying  union  activities  and  the  programs  which  the 
employers  are  trying  to  put  through. 

B.  29,  359,  360. 

C.  I .  Account  for  the  great  attention  recently  given  to  scientific 
management.  2.  What  improvements  does  scientific  management 
propose  in  organization,  management,  choice  of  man,  planning? 
3.  What  incentives  does  it  offer  the  laborer  to  apply  himself  more  per- 
sistently and  intelligently  to  his  work  ?  4.  Are  the  objections  to  it 
urged  by  the  unions  group,  class,  or  social  objections?  5.  What 
advantages  may  be  expected  from  it  to  the  employer  ?  the  laborer  ? 
the  public  ?    6.  Does  it  offer  a  solution  to  the  labor  problem  ? 

D.  I.  ''The  primary  social  problem  is  that  of  production. 
Solve  that  and  the  problem  of  distribution  will  take  care  of  itself." 
Develop  the  argument.    Do  you  accept  it  ? 

2.  "Scientific  management,  by  increasing  productive  efficiency, 
will  decrease  costs  of  production.  Since,  under  competition,  a  new 
scheme  of  prices  will  be  established,  based  on  new  costs,  the  general 
public  will  be  the  only  permanent  gainer  from  the  change."  Connect 
this  with  the  principle  that  society  is  best  served  by  each  serving  his 
own  pecuniary  interest.    Is  it  valid  ? 

3.  "Scientific  management  is  a  mere  device  for  securing  the 
maximum  from  laborers.  It  selects  them  carefully,  gives  each  just 
the  proper  quantum  of  training,  strips  them  of  their  labor  power 
through  artificial  wage  incentives,  scraps  them  like  old  machinery, 
and  starts  afresh  with  a  new  group  of  carefully  selected  laborers." 
How  much  is  there  in  this  argument  ?  What  have  competition  and 
short-term  labor  contracts  to  do  with  it  ? 

4.  "By  its  usurpation  of  the  control  of  technique,  scientific  man- 
agement threatens  to  rob  laborers,  individually  or  collectively,  of  the 
property  rights  which  at  present  they  possess  in  their  trades."  State 
this  argument  more  fully.    What  validity  has  it  ? 

5.  "Scientific  management  and  unionism  are  in  irreconcilable 
conflict.  The  former  gives  control  of  the  business  to  the  employer, 
tends  toward  specialized  tasks  and  hence  individual  bargaining,  and 


THE  PROBLEMS  OF  TRADE  UNIONISM  83 

threatens  a  premature  using  up  of  the  laborer's  productive  contribu- 
tion. The  latter  insists  upon  union  control  of  technique,  collective 
bargaining,  and  the  conservation  of  the  resources  of  labor."  Examine 
this  alleged  antithesis  in  detail,  and  pass  judgment  upon  it. 

6.  "Even  if  it  realizes  all  that  is  claimed  for  it,  scientific  manage- 
ment can  furnish  no  permanent  solution  of  the  labor  problem.  If  it 
gives  more,  the  pressure  is  relieved  immediately,  but  with  increasing 
population  it  will  return."  If  real  wages  were  generally  doubled, 
would  that  solve  the  labor  problem?  If  the  program  of  unionism 
was  realized  in  every  respect,  would  that  solve  the  labor  problem  ? 
How  long  will  this  problem  be  with  us  ? 

78.     Unionism  and  the  Anti-Trust  Laws 

A.  As  the  use  of  their  economic  weapons  has  been  more  and  more 
restricted,  unionists  have  begun  to  look  with  more  and  more  favor 
upon  political  action.  The  recent  attempt  to  have  labor  unions 
exempted  from  the  provisions  of  the  "anti- trust"  laws  marks  the 
first  step  in  what  is  likely  to  prove  a  lengthy  and  interesting  chapter 
in  political  history. 

B.  55,  329,  334.  '  ■  , 

C.  I.  Is  labor  a  commodity?  2.  Explain  and  account  for  the 
difference  in  views  between  Gompers  and  Taft  on  the  exemption  of 
labor  unions  from  the  "anti-trust"  laws.  3.  Of  what  value  to  unions 
is  the  legal  exemption  of  labor  combinations  in  the  Clayton  bill  ? 

D.  I.  "Labor  is  a  commodity  which,  unlike  other  commodities, 
attaches  in  a  peculiar  way  to  the  person  of  man.  Hence  conditions 
need  to  be  placed  upon  its  sale  which  would  be  unnecessary  in  other 
cases"  (Green).  If  so,  should  closed  unions  be  allowed  to  impose 
tshese  conditions  upon  employers,  or  should  they  be  determined  by  the 
state  ? 

2.  Is  a  provision  estopping  prosecution  of  an  individual  "for 
entering  into  any  combination  or  agreement  having  in  view  the 
increasing  of  wages,  shortening  of  hours,  or  bettering  the  condition 
of  labor"  class  legislation  ?  What  is  class  legislation  ?  Is  legislation 
properly  to  be  condemned  because  it  is  class  legislation? 

3.  State  quite  fully  why  the  counsels  favorable  to  "direct  action" 
prevailed  in  union  circles  two  decades  ago  ?  Why  is  the  party  favor- 
able to  "political  action "  gaining  ground  ? 

79.    Revolutionary  Unionism 

A.  With  the  development  of  our  highly  industrial,  pecuniary, 
and  urban  culture  there  springs  up  a  spirit  of  revolutionary  protest. 
To  some  extent  this  manifests  itself  in  independent  organizations, 


84         CURRENT  ECONOMIC  PROBLEMS 

but  to  a  much  greater  extent  among  the  rank  and  file  of  unionists 
themselves.  Its  study  reveals  class  consciousness  in  its  most  extreme 
form. 

B.  286,355. 

C.  I.  Account  for  the  presence  in  this  country  of  revolutionary 
unionism.  2.  Contrast  the  purposes,  programs,  and  weapons  of  the 
industrial  and  the  trade  unions  ?  3.  Sketch  and  criticize  the  proposed 
syndicalistic  organization  of  society.  4.  Cite  examples  of  different 
kinds  of  sabotage  which  have  come  under  your  own  observation. 
5.  Is  sabotage  confined  to  the  industrial  unions?  to  labor  unions? 
to  the  laboring  class?  6.  Could  a  general  strike  succeed?  7.  Of 
what  value  is  revolutionary  unionism  in  a  general  study  of  the  labor 
problem  ? 

D.  I.  "The  very  success  of  the  employers  in  checking  unionism 
is  the  chief  cause  of  the  rise  of  revolutionary  unionism.  Sabotage 
can  be  apprehended  by  no  policemen  and  dragged  into  no  court." 
Is  the  first  statement  true  ?  Are  laborers  likely  to  find  sabotage  a 
useful  weapon? 

2.  What  is  an  "intermittent  strike"?  Is  it  to  be  classified  as  a 
strike  or  as  sabotage  ?    Is  it  an  effective  weapon  for  direct  action  ? 

3.  "The  use  of  sabotage  is  attended  with  grave  social  dangers. 
It  makes  the  laborer  himself  the  judge  of  whether  he  is  given  his 
rights;  it  encourages  a  spirit  of  disregard  of  productive  efiiciency; 
and  it  threatens  the  whole  pecuniary  organization  of  society."  Show 
by  concrete  examples  how  real  and  threatening  these  dangers  are. 

4.  "The  general  strike  can  never  succeed,  for  the  class  which 
would  suffer  first  from  it  would  be  the  industrial  workers."  Do 
you  agree  ? 

5.  "Their  ability  to  wait  gives  to  the  employers  in  the  industrial 
struggle  an  advantage  which  laborers  will  never  be  able  to  possess.* 
Are  short  strikes  usually  won  by  laborers  or  by  employers?  long 
strikes  ?  Enumerate  quite  definitely  the  strategic  advantages  which 
ability  to  wait  gives  the  employers. 

6.  Imagine  yourself  a  leader  in  the  trade-union  movement  and 
draw  up  a  comprehensive  and  adequate  program  for  future  action. 


XIT.     SOCIAL  REf^ORM  AND  LEGAL  INSTITUTIONS 
80.     The  Legal  System 

A.  Our  institutions,  such  as  law,  property,  and  competition,  are 
interesting  ahke  from  the  standpoint  of  order  and  of  welfare.  From 
the  former  viewpoint  they  are  elements  in  the  social  order;  from  the 
latter  they  are  conventions  capable  of  modification  in  the  interests  of 
general  or  group  welfare.  To  questions  of  the  social  advisability  of 
modifying  these  institutions,  and  the  nature  of  such  modification,  the 
questions  which  we  have  already  discussed,  particularly  economic 
insecurity  and  trade  unionism,  have  led  us.  The  first  of  these  to  be 
considered  is  the  legal  system. 

B.  48,60,309. 

C.  I.  Why  has  the  resolution  of  social  problems  into  institutional 
questions  come  so  late  in  America  ?  2.  Is  the  theory  of  the  economic 
basis  of  law  adequate?  3.  Show,  by  concrete  illustrations,  that  law 
is  not  immutable?  4.  Are  there  today  serious  incompatibilities 
between  law  and  the  economic  and  social  system?  5.  Should  the 
law  be  a  conservative  or  a  radical  factor  in  social  development? 
6.  Does  an  affirmative  answer  to  the  preceding  question  commit  one 
to  opposing  the  introduction  of  a  new  concept  of  "social  justice" 
into  the  law  ? 

D.  I.  Write  a  short  essay  upon  "The  Function  of  Law  in  the 
Maintenance  of  the  Economic  Order." 

2.  "The  intricate  and  delicately  balanced  industrial  system,  with 
its  requirement  of  many  immediate  judgments  affecting  the  future 
welfare  of  all  classes,  demands,  even  more  than  it  demands  absolute 
justice,  certainty  in  the  law."  Show  that  a  definite  legal  system  is 
necessary  to  eflSciency  under  the  present  industrial  order. 

3.  "It  is  only  as  law  prescribes  definite  fundamental  conditions 
that  progress  in  other  aspects  of  social  life  becomes  possible."  Develop 
this  argument  in  detail.    Is  it  valid  ? 

4.  "The  legal  use  of  precedents  is  incompatible  with  modern 
thought.  We  know  that  as  time  goes  on  qualitative  changes  come 
over  all  things  human.  Our  institutions  are  constantly  becoming 
new  institutions.  Yet  the  method  of  precedents  ignores  these  changes, 
and  proceeds  as  if  things  called  by  the  same  names  in  the  sixteenth 
and  the  twentieth  centuries  were  the  same."  Develop  this  argument, 
citing  the  most  convincing  evidence  that  you  possess.  Do  you  regard 
it  as  conclusively  disposing  of  precedents  ? 

8s 


86         CURRENT  ECONOMIC  PROBLEMS 

5.  "The  individualistic  basis  of  law  is  incompatible  with  an 
intricate  co-operative  industrial  system,  wherein  individual  responsi- 
bility cannot  be  definitely  located."  Illustrate,  by  reference  to  the 
corporation  problem,  the  problem  of  the  state  and  the  railway,  and 
the  problem  of  industrial  accident. 

6.  "The  principle  of  'equal  rights  to  all,  special  privileges  to  none' 
can  be  applied  in  a  homogeneous  society,  composed  of  individuals 
who,  economically  and  socially,  are  approximately  equal;  but  it  is 
meaningless  in  a  society  made  up  of  heterogeneous  groups,  who  per- 
form unlike  functions  and  who  occupy  unlike  positions,  economically 
and  socially."    Explain.   What  has  this  to  do  with  "class  legislation "  ? 

7.  Formulate  a  conception  of  "social  justice"  relevant  to  the 
present  situation  and  adequate  to  the  purpose,  which  can  be  made 
the  basis  of  our  legal  system.  What  is  involved  in  the  thorough 
incorporation  of  such  a  concept  into  the  law  ? 

81.     Private  Property 

A.  A  second  institution,  private  property,  has  a  like  interest 
from  the  standpoints  of  order  and  welfare.  Private  equities  in  prop- 
erty, either  direct  or  indirect,  are  inseparable  from  social  order.  But 
the  distribution,  forms,  and  conditions  of  ownership  of  these  equities 
are  subject  to  the  greatest  variety. 

B.  16,  254,  289,  354,  372. 

C.  I.  Compare  the  mediaeval  and  the  modem  institutions  of 
private  property.  2.  On  what  various  ethical  bases  is  private  prop- 
erty justified?  3.  On  what  ethical  grounds  is  an  attack  made  upon 
private  property?  4.  What  is  the  proper  ethical  criteria  by  which 
to  judge  property?  5.  In  accordance  with  these,  what  forms  of 
modem  property  are,  and  what  are  uot,  justified  ? 

D.  I.  Distinguish  between  and  pass  upon  the  validity  of  each  of 
the  following  definitions  of  property:  (a)  "ownership  of  material 
things " ;  (5)  " a  right  to  a  pecuniary  income " ;  (c)  "a  right  to  a  share 
of  the  social  dividend  produced  by  labor";  and  (d)  "a  complex  of 
ideas  and  regulations  as  to  how  accumulated  power  in  the  struggle 
for  self -maintenance  is  to  be  distributed."  Formulate  a  satisfactory 
definition  of  property. 

2.  Show  how  equities  in  property  may  be  modified  by  the  state; 
by  changes  in  social  conventions;  by  changes  in  technique. 

3.  "The  transition  from  the  personal  organization  of  society  in 
the  Middle  Ages  to  the  pecuniary  organization  of  modern  industrialism 
was  accompanied  by  a  redistribution  between  owner  and  worker  of 
the  equities  in  labor  and  in  productive  instruments."  Explain. 
What  light  does  this  throw  upon  the  nature  of  property  ? 


SOCIAL  REFORM  AND  LEGAL  INSTITUTIONS  87 

4.  "  Private  equities  in  property  are  with  us  forevermore.  Under 
forms  of  collective  ownership  the  nexus  between  the  individual  and 
the  material  thing  is  broken;  but  there  still  remain  to  individuals 
equities  in  the  organization  which  owns  the  material  things."  Illus- 
trate for  monasticism;  for  a  socialistic  state. 

5.  Show,  by  illustrations,  how  the  institution  of  private  property 
prevents  acts  economically  destructive;  makes  it  to  the  interests  of 
various  persons  to  perform  productive  operations;  obliges  persons 
to  co-operate;  establishes  an  institutional  system  that  encourages 
co-operation;  and  enables  world-wide  co-operation  to  take  place. 

6.  ''Private  property,  freedom  of  contract,  and  competition  are 
complementary  institutions,  together  adapted  to  the  functions  which 
they  perform  in  the  organization  of  modern  society  upon  a  pecuniary 
basis,"  Taking  this  as  your  text,  write  a  short  essay  upon  "The 
Fundamental  Institutions  of  Organization  in  Modern  Society." 

7.  "The  real  problems  associated  with  private  property  are  con- 
cerned with  a  distribution  of  the  public  and  the  private  equities  in 
property."    Explain,  with  concrete  illustrations. 

8.  "The  early  church  doctrine  of  Christian  communism  plus  the 
mediaeval  recognition  of  the  rights  of  private  property  equals  the 
modern  doctrine  of  Christian  charity."   Explain  fully.    Do  you  agree? 

9.  "The  two  complementary  aspects  of  property  are  rights  and 
responsibilities.  For  property  properly  to  play  its  part  in  the  social 
order  the  two  must  be  associated."  Were  the  two  closely  associated 
in  the  Middle  Ages  ?  With  the  rise  of  modern  industrialism  which 
has  the  more  nearly  dominated  the  concept?  What  are  the  real 
problems  relative  to  property  which  the  modern  order  has  as  yet 
failed  to  solve  ? 

10.  "The  real  problem  of  property  is  to  secure  a  more  equitable 
distribution  of  its  benefits  without  interfering  with  the  essential 
functions  which  it  performs  in  organizing  society  and  stimulating 
production."  Do  you  accept  this  statement  of  the  problem  ?  How 
is  it  to  be  solved  ? 

82.     Industrial  Liberty 

A.  A  third  institution,  industrial  liberty,  is  of  a  kind  with  and 
complementary  to  those  just  studied.  Like  them,  it  is  alike  a  factor 
in  social  order  and  in  social  welfare. 

B.  45,49,55,74,  i35,  318. 

C.  I.  What  is  the  relation  of  freedom  of  contract  to  the  modern 
institution  of  property?  2.  Explain  the  theory  of  the  "mediatory 
character  of  freedom."  Is  it  held  by  the  courts  ?  3.  In  the  light  of 
"what  freedom  of  contract  has  meant  to  labor"  appraise  the  argu- 
ment that  it  develops  personal  responsibihty.     4.  Is  freedom  of 


88         CURRENT  ECONOMIC  PROBLEMS 

contract  premised  upon  an  outworm  philosophy?  5.  Do  those  who 
criticize  the  legal  principle  advocate  its  abandonment  or  its 
modification  ? 

D.  I.  ''The  spirit  of  individualism  attending  the  opening  of  the 
New  World  and  the  Industrial  Revolution  found  expression  in  un- 
restricted freedom  of  contract.  As  the  industrial  system  loses  its 
transitional  quality  freedom  of  contract  will  be  more  and  more 
restricted."    Do  you  agree  ? 

2.  "The  right  of  a  person  to  sell  his  labor  upon  such  terms  as  he 
deems  proper  is,  in  its  essence,  the  same  as  the  right  of  the  purchaser 
of  labor  to  prescribe  the  conditions  upon  which  he  will  accept  such 
labor  from  the  person  offering  to  sell  it.  So  the  right  of  the  employee 
to  quit  the  service  of  the  employer,  for  whatever  reason,  is  the  same 
as  the  right  of  the  employer,  for  whatever  reason,  to  dispense  with  the 
services  of  the  employee.  In  all  such  particulars  the  employer  and 
the  employee  have  equality  of  right,  and  any  legislation  that  disturbs 
that  right  is  an  arbitrary  interference  with  the  liberty  of  contract, 
which  no  government  can  legally  justify  in  a  free  land"  (United 
States  Supreme  Court).  Is  the  equality  of  rights  presumed  in  this 
quotation  real  or  fictitious  ?    Attack  or  defend  this  doctrine. 

3.  "Because  of  its  false  assumption  of  equality  of  rights  between 
employer  and  employee,  the  principle  of  freedom  of  contract  amounts 
to  class  favoritism."    Do  you  agree  ? 

4.  "A  regulation  of  the  plane  of  competition  necessarily  involves  a 
restriction  of  freedom  of  contract."    Why  ? 

5.  "A  tenacious  insistence  upon  absolute  freedom  of  contract 
would  inhibit  any  rational  attempt  at  social  reform  through  legisla- 
tion."   Using  concrete  illustrations,  defend  or  attack  this  statement. 

6.  "Public  policy  is  a  very  unruly  horse,  and  when  once  you  get 
astride  it  you  can  never  tell  where  it  will  carry  you."  Does  this 
statement  suggest  the  legal  means  by  which  freedom  of  contract  is 
likely  to  be  modified  in  the  future  ? 

83.    The  Courts  and  Labor 

A.  Attempts  to  advance  the  pecuniary  interests  of  the  laborer, 
whether  made  by  unions  or  by  the  state,  are  likely  to  involve,  directly 
or  indirectly,  questions  of  property  rights  and  of  freedom  of  contract. 
Accordingly  sooner  or  later  they  call  for  judicial  decision.  Since  for 
the  last  few  years  judicial  decision  has  pursued  the  comparatively 
even  tenor  of  its  way,  many  weapons  used  to  aid  organized  labor  have 
been  wrested  from  its  grasp  or  rendered  ineffective. 

B.  60,  64,  289,  299,  309,  329. 

C.  I.  Why  do  judicial  decisions  loom  so  large  as  a  factor  in  the 
labor  problem?     2.  Compare  and  criticize  the  theories  underlying 


SOCIAL  REFORM  AND  LEGAL  INSTITUTIONS  89 

the  decisions  of  the  courts  on  the  limitation  of  the  working-day 
for  women.  3.  Are  employer's  and  employee's  rights  reciprocal? 
4.  State  in  general  terms  the  issues  involved  in  the  Danbury  Hatters' 
cases,  and  defend  or  attack  the  final  court  decisions.  5.  Should 
injunctions  be  allowed  in  labor  disputes  ?  6.  Appraise  the  reality  of 
the  assumptions  and  the  validity  of  the  argument  in  the  decision  on 
''Unionism  and  the  Conditions  of  Employment." 

D.  I.  "A  regulation  of  conditions  of  employment  for  men  is 
class  legislation."  Legally,  what  is  a  class  ?  Is  a  class  a  reality  or  a 
legal  fiction  ?  In  a  differentiated  society  such  as  ours  what  is  a  class  ? 
In  such  a  society  is  it  practicable  to  prohibit  "class  legislation"  ? 

2.  "Freedom  of  contract  can  be  abridged  only  by  the  exercise  of 
the  police  power  of  the  state."  For  what  purposes  may  the  police 
power  be  invoked  ?  Just  how  is  it  to  be  determined  whether  a  par- 
ticular attempt  comes  within  one  of  these  general  purposes?  In 
general,  should  questions  of  the  last  kind  be  determined  by  the  legis- 
lature or  by  the  courts  ? 

3.  "The  inherent  powers  of  our  courts  of  equity  shall  not  be 
abridged  in  the  issuance  of  injunctions  in  labor  disputes;  and  the 
power  vested  in  our  courts  to  punish  for  contempt  of  court  shall  not 
be  abridged  by  the  granting  of  jury  trial  for  contempt."  Connect 
these  two  questions  with  the  struggle  between  employers  and  unions. 
*     4.  "The  law  does  not,  and  should  not,  embody  a  particular 

economic  theory."  Criticize  this  statement  in  the  light  of  judicial 
decisions  with  which  you  are  familiar. 

5.  "The  law  of  property  and  contract,  -as  interpreted  by  the 
courts,  gives  economic  advantages  of  superlative  importance  to 
capital  in  its  conflict  with  labor."    Do  you  agree  ? 

6.  "Violence  and  lawlessness  are,  of  course,  to  be  condemned; 
but  what  of  a  legal  system  that  gives  to  laborers  no  other  means  for 
an  expression  of  their  just  demands?"  Is  this  criticism  of  the  legal 
system  warranted  ?  What  means  have  laborers  for  an  expression  of 
their  demands? 

7.  "Through  a  natural  strategic  advantage  and  close  organization 
possessed  by  the  employers  many  of  the  weapons  of  unionism  have 
been  rendered  ineffective.  Through  an  extension  of  judicial  inter- 
pretation of  the  rights  of  property  and  of  contract  other  weapons 
have  been  rendered  useless.  The  unions,  therefore,  are  confronted 
with  the  alternative  of  vigorous  political  action  or  the  use  of  sabotage 
and  kindred  devices."  Translate  the  first  sentence  into  concrete 
terms.  Is  the  second  sentence  a  truthful  statement  of  the  present 
situation  ?  If  you  were  a  leader  in  the  union  movement,  what  would 
be  your  advice  as  to  the  future  ?  Compare  your  answer  to  this 
question  with  that  which  you  gave  to  problem  6  in  section  79. 


XIII.    SOCIAL  REFORM  AND  TAXATION 
84.    Taxation  and  Industrial  Development 

A.  A  discussion  of  the  control  of  industrial  development  is 
incomplete  if  it  does  not  touch  the  problems  of  taxation;  for,  first, 
there  is  the  problem  of  adjusting  the  scheme  of  taxation  to  the  new 
forms  in  which  industrial  activities  run;  secondly,  if  the  functions 
of  the  state  are  to  be  increased,  there  is  the  necessity  of  additional 
revenue;  and  thirdly,  there  is  the  ever-present  possibility  of  using 
the  fiscal  system  itself  as  a  means  of  social  control. 

B.  25,  56,  58,  267. 

C.  I.  What  particular  problems  have  recently  given  current 
interest  to  questions  of  taxation?  2.  What  changes  in  social  organi- 
zation are  we  effecting  ?  What  influence  are  they  likely  to  exert  upon 
social  expenditures?  3.  Show,  by  illustrations,  how  taxation  can  be 
used  as  a  means  of  social  control.    Should  it  be  so  used  ? 

D.  I.  ''To  extend  our  educational  system;  to  furnish  to  the 
people  opportunities  for  recreation,  amusement,  and  cultural  develop- 
ment; to  lighten  the  burden  of  economic  insecurity;  and  to  perfect 
an  adequate  mechanism  of  social  control,  we  must  have  additional 
revenue."  By  surveying  the  problems  which  we  have  discussed,  show 
quite  concretely  this  need  for  a  g/rowing  revenue.  Can  the  established 
tax  system  yield  it  in  suflScient  volume  ? 

2.  "A  system  of  taxation  must  not  interfere  with  the  relative 
advantages  possessed  by  competing  business  units  and  industrial 
groups."  Of  what  larger  theory  is  this  a  mere  aspect?  Account 
for  its  popularity. 

3.  "In  America  the  system  of  taxation,  by  encouragement  and 
penalty,  has  served  as  a  means  for  determining  the  direction  of  indus- 
trial development."  Mention  taxes  whose  object  has  been  to  dis- 
courage consumption;  to  encourage  production.  What  particular 
tax  has  been  quite  influential  in  making  our  culture  a  highly  industrial 
one?  Can  taxes  be  levied  in  such  a  way  as  not  to  exercise  control 
over  industrial  development  ? 

4.  An  appraisal  of  the  taxable  property  of  Michigan  shows  that, 
while  all  property  is  supposed  to  be  taxed  at  a  uniform  rate,  various 
classes  of  property  are  in  reality  taxed  at  the  following  rates:  agri- 
cultural property,  $10  per  $1,000;  railroads,  $20.65;  banks,  $17; 
public  utilities,  $7;  mines,  $7;  city  residences,  $4.70;  and  manu- 
factures, $5.30.    What  is  meant  by  "the  territorial  competition  for 

90 


SOCIAL  REFORM  AND  TAXATION  91 

industries"?    Do  the  figures  above  throw  any  light  upon  this  com- 
petition ?    Do  they  aid  in  answering  the  last  question  in  3,  above  ? 

85.  The  Theory  of  Taxation 

A.  To  use  such  an  instrument  as  taxation  aright  we  must  deter- 
mine what  particular  classes  or  properties  are  to  be  assessed,  why  the 
burdens  are  to  be  placed  upon  them,  how  the  taxes  thus  placed  may 
be  expected  to  behave,  and  what  results  they  will  probably  lead  to. 
This  involves  an  adequate  knowledge  of  the  technique  of  taxation 
and  a  thorough  knowledge  of  our  social  program  as  a  whole  and  what 
we  expect  to  accomplish  by  it. 

B.  43,  49,  55,  56. 

C.  I.  Are  Adam  Smith's  canons  of  taxation  valid  today  ?  2.  Ap- 
praise the  merits  of  the  *' benefits  theory";  the  "faculty  theory"; 
and  the  "theory  of  proportional  sacrifice."  3.  Define  and  illustrate 
"progressive  taxation."  4.  Upon  what  classes  and  properties,  and 
in  what  proportions,  should  taxes  be  levied  ? 

D.  I.  Hffs  the  state  the  moral  right  to  tax  the  bachelor  for  the 
support  of  schools  ?  to  pay  for  harbor  improvements  through  internal- 
revenue  duties?  to  pay  for  the  professional  education  of  lawyers 
and  physicians  by  land  taxes  ?  to  pay  old-age  pensions  by  levying 
income  taxes? 

2.  "Each  should  pay  in  proportion  to  the  benefits  he  has  received 
from  the  state."  Can  the  benefits  yielded  by  the  state  to  various 
individuals  be  stated  in  terms  pecuniarily  exact  ? 

3.  "Taxes  should  be  levied  in  such  a  way  as  not  to  interfere  with 
the  provision  which  society  is  makiag  for  its  future.  They  should, 
therefore,  fall  upon  the  parts  of  incomes  which  otherwise  would  be 
devoted  to  consumptive  purposes.  To  be  safe,  it  is  always  best  to 
levy  taxes  upon  the  poor,  who  are  reasonably  sure  to  save  nothing 
from  their  incomes."  Defend  this  theory.  Has  it  been  tried  in 
the  past  ? 

4.  "  Earned  incomes  should  be  taxed  at  a  lower  rate  than  unearned 
incomes."  Draw  a  line  between  earned  and  unearned  incomes.  Is 
such  a  procedure  justifiable  ? 

5.  Should  taxation  be  used  to  secure  "a  more  equitable  distribu- 
tion" of  wealth  ?    How  can  it  be  so  used  ? 

86.  The  Incidence  of  Taxation 

A.    Whether  we  use  taxation  as  an  instrument  of  revenue  or  of 

social  control,  to  effect  our  object  we  must  understand  its  technique. 

%  For  taxes  do  not  always  stay  where  they  are  put;  their  "incidence" 


92         CURRENT  ECONOMIC  PROBLEMS 

may  appear  in  strange  places,  and  they  may  produce  unlooked-for 
and  undesirable  consequences. 

B.  163,  168,  178. 

C.  I.  Explain  the  terms  "shifting"  and  "incidence."  2.  What 
is  meant  by  "forward"  and  "backward"  shifting  ?  Give  an  example 
of  backward  shifting.  3.  What  would  be  the  probable  consequences 
of  the  incidence  of  a  tax  falling  upon  each  of  the  factors  of  production  ? 
4.  Under  what  conditions  does  the  incidence  of  the  customs  tax  fall 
upon  the  foreign  producer  ?    upon  the  domestic  consumer  ? 

D.  I.  "The  incidence  of  a  tax  on  a  non-producible  good  usually 
falls  upon  the  owner."    Prove. 

2.  "  The  incidence  of  a  tax  on  a  producible  good  usually  falls  upon 
the  consumer,  though  it  may,  on  occasion,  be  thrown  black  upon  the 
producer  of  a  raw  material."  Enumerate  the  conditions  under  which 
it  is  thrown  forward;  backward. 

3.  A  residence  in  Bloomington  is  taxed  each  year  $70;  of  this, 
$40  is  chargeable  to  the  house  and  $30  to  the  lot.  The  tax  on  the 
house  will  be  paid  by  whom  ?    the  tax  on  the  lot  ? 

4.  "In  the  election  on  the  bond  issue  next  Tuesday,  only  property- 
owners  should  be  allowed  to  vote,  for  they  alone  pay  taxes."  Show 
that  those  who  live  in  rented  houses  pay  taxes. 

5.  "The  imposition  of  a  new  tax  on  land  is  equivalent  to  a  con- 
fiscation of  the  capitalized  value  of  the  tax;  the  revocation  of  a  long- 
standing tax  is  tantamount  to  a  free  gift  of  the  capitalized  value  of  the 
tax."     Prove. 

6.  "A  large  share  of  the  burdens  of  taxation  in  the  southern  states 
falls  directly  upon  the  negro.  It  is  true  that  the  taxes  are  paid  imme- 
diately by  the  whites,  but  because  of  them  the  negro  has  to  pay  their 
equivalent  in  extra  rent."    Disprove. 

7.  "If  a  monopoly  fixes  its  prices  in  such  a  way  as  to  secure  the 
greatest  maximum  return,  at  least  a  part  of  the  tax  placed  upon  the 
goods  sold  by  the  monopoly  will  fall  ultimately  upon  it."  Explain. 
What  determines  how  large  a  part  will  fall  upon  the  monopoly  ? 

8.  "High  taxes  should  not  be  imposed  upon  public-service  indus- 
tries whose  rates  are  subject  to  regulation.  Such  taxes  make  necessary 
an  increase  in  the  rates  which  the  public  has  to  pay  for  their  services." 
If  the  rates  of  such  industries  are  subject  to  regulation,  would  it  be 
socially  desirable  to  exempt  then  from  taxation  altogether  ? 

87.     "Unscientific"  Taxation 

A.  In  the  wake  of  the  Industrial  Revolution  there  has  come  a 
complete  transformation  of  life  and  values.  It  is  not  surprising  that  a 
taxation  system,  established  to  meet  the  needs  of  a  simpler  economic 


SOCIAL  REFORM  AND  TAXATION  93 

regime,  should  fail  to  conform  to  present  social  requirements.  This 
failure  is  most  manifest  in  the  "general  property  tax."  It  is  most 
significant  in  its  failure  to  be  grounded  upon  a  modern  concept  of 
property. 

B.  320,338- 

C.  I.  What  concept  of  property  should  lie  at  the  basis  of  a 
system  of  taxation?  2.  Illustrate,  from  your  own  observation,  the 
defects  of  the  general  property  tax.  3.  What  is  the  fundamental 
objection  to  multiple  taxation  ? 

D.  I.  Discuss  the  definitions  of  property  given  in  problem  i  in 
section  81  above,  with  the  end  in  view  of  formulating  a  concept 
adequate  for  a  theory  of  taxation. 

2.  "A  recent  newspaper  item  says,  'This  is  the  year  real  estate 
is  assessed.  Turn  the  cow  loose  in  the  front  yard,  tear  down  the 
fence,  make  things  look  generally  delapidated,  for  it  will  be  money 
in  your  pocket' "  (Fetter) .  What  is  the  significance  of  this  statement  ? 
Will  it  be  to  your  advantage  if  you  alone  carry  out  this  policy  ?  if 
all  your  neighbors  carry  it  out  ? 

3.  "A  systematic  scheme  of  taxation  is  impossible  so  long  as  the 
political  units  imposing  taxes  are  not  coterminous  with  the  industrial 
units  which  are  assessed."  Explain.  Why  has  this  particular  sig- 
nificance for  the  general  property  tax  ? 

4.  Devise  a  practicable  substitute  for  the  general  property  tax. 

88.    Tendencies  in  Taxation 

A.  We  are  intent  upon  making  our  tax  system  conform  to 
modern  forms  of  wealth.  We  are  intent  upon  distributing  our  tax 
burdens  more  "  equitably."  Together  these  intentions  find  expression 
in  the  increased  emphasis  which  we  are  putting  upon  "corporation," 
"income,"  and  "inheritance"  taxes. 

C.  I.  Why  is  the  general  property  tax  inadequate  in  the  case 
of  corporations  ?  2.  Enumerate  the  features  of,  and  pass  a  judgment 
upon,  the' Massachusetts  corporation  tax.  3.  Why  should  we  have 
a  federal  income  tax?  4.  Will  a  capitalization  of  the  inheritance 
tax  free  it  from  the  economic  objections  which  are  usually,  urged 
against  it? 

D.  I.  "In  modem  industrialism  all  property  has  a  pecuniary 
aspect.    In  fact,  property  is  valuable  only  as  it  yields,  or  is  expected 

'  to  yield,  a  money  income.  Its  value  varies  directly  with  the  size  of 
the  income.  Accordingly,  all  taxes  should  be  abolished  except  a  single 
uniform  tax  on  incomes."  Does  the  conclusion  necessarily  follow  ? 
Support  or  attack  the  conclusion. 

2.  Should  income  taxes  be  imposed  by  the  nation,  by  the  state,  or 
by  both  ?    What  of  corporation  taxes  ?    inheritance  taxes  ? 


94         CURRENT  ECONOMIC  PROBLEMS 

3.  *'An  income  tax  should  be  levied  in  such  a  way  that  it  will  be 
paid  by  the  assessed  out  of  the  part  of  his  income  which  he  spends 
and  not  out  of  the  part  which  he  saves."  Why  ?  Devise  an  income- 
tax  law  that  will  secure  this  result  ? 

4.  "The  greater  the  aggregate  income,  the  greater  the  proportion 
which  will  be  saved.  If  society  pretends  to  make  provision  for  its 
future,  it  will,  therefore,  devise  a  tax  system  which  will  place  the 
greater  part  of  the  tax  burdens  upon  the  poor."  Elaborate  this 
argument.  Does  the  present  scheme  of  taxation  meet  this  ideal? 
If  not,  what  changes  would  you  make  in  it  ?  Do  you  accept  the  gen- 
eral theory  that  the  paying  of  taxes  is  an  attribute  of  the  poor  ? 

5.  "The  principle  of  graduation,  as  applied  to  the  income  and 
inheritance  taxes,  places  the  burden  of  taxation  where  it  should  rest, 
upon  the  shoulders  of  those  who  can  pay."  "  Graduated  income  and 
inheritance  taxes  discourage  the  display  of  ability  and  enterprise; 
they  place  a  premium  on  sloth  and  a  discount  on  thrift."  Where  lies 
the  truth  ? 

6.  "The  future  is  likely  to  witness  a  greatly  increased  use  of 
inheritance  and  income  taxes."    Why  or  why  not  ? 

89.    The  Single  Tax 

A.  The  taxes  just  discussed  indicate  a  growing  disposition  to 
use  taxation  as  an  agency  of  "social  reform."  This  tendency  is 
shown  in  its  most  extreme  form  in  the  proposal  of  a  "single  tax"  on 
land  values.  Originally  it  contemplated  taking  away  the  full  rental 
in  taxation.  At  present  its  advocates  are  content  to  urge  a  modest 
percentage  of  the  full  rental. 

B.  322-25. 

C.  I.  Why  should  an  increase  in  land  values  be  of  greater  public 
concern  than  an  increase  ia  personal  or  capital  values  ?  2.  Enumerate 
the  arguments  for  and  against  economic  rent  as  a  private  income. 
3.  State  and  criticize  the  theoretical  basis  of  the  single  tax.  4.  Why 
are  single-tax  reformers  making  much  more  modest  proposals  than 
they  did  a  generation  ago  ?  5.  What  directly  or  indirectly  has  society 
to  gain  from  such  a  scheme  as  the  single  tax  ? 

D.  I.  What  would  be  the  influence  of  a  tax  of  100  per  cent  of 
the  rent  of  land  upon  the  value  of  land  ?    the  prices  of  the  commodities 
produced  on  the  land  ?    the  price  which  the  cultivator  would  have  to  . 
pay  for  the  use  of  the  land  ?   the  distribution  of  economic  opportunity  ? 

2.  "Because  of  differences  in  fertility  or  situation  between  dif- 
ferent pieces  of  land,  rent  is  necessary  to  secure  equality  of  oppor- 
tunity to  the  various  cultivators.  Because  of  this  economic  function 
rent  is  as  inevitable  under  socialism  as  under  the  present  system." 


SOCIAL  REFORM  AND  TAXATION  95 

Develop  this  argument  fully.    Is  it  an  argument  for  rent  as  a  private 
income  ? 

3.  If  the  state,  through  taxation,  takes  away  the  "unearned 
increment"  in  land  values,  should  it  be  required  to  subsidize  decre- 
ments in  such  values  ? 

4.  "There  are  'unearned  increments'  in  incomes  from  personal 
service  and  from  invested  capital,  as  well  as  from  land."  Mention 
examples,  if  you  can.  Are  such  increments  economically  to  be 
classed  with  those  arising  from  land?  What  is  the  test  of  "earned" 
and  "  unearned  "  values  ? 

5.  "Since  all  property,  landed  and  personal,  can  be  freely  bought 
and  sold,  there  is  no  assurance  that  a  tax  upon  the  increase  in  land 
values  would  be  paid  by  the  person  who  profited  by  such  an  increase." 
Is  this  argument  valid  so  far  as  past  increases  are  concerned  ?  future 
increases  ? 

6.  "The  single  tax  tries  to  justify  or  condemn  incomes  because 
of  their  origin.  Sound  social  policy  requires,  on  the  contrary,  a  con- 
demnation or  justification  on  the  basis  of  the  end  which  incomes 
serve."    Develop  this  argument  in  detail  and  examine  it. 

7.  "Once  single- taxers  urged  their  scheme  as  a  panacea  for  all 
social  ills.  Now  they  are  arguing  that  it  is  the  only  tax  which  can 
furnish  revenue  sufiicient  for  financing  the  measures  necessary  to  a 
reduction  of  social  ills."    Explain  the  change  of  viewpoint. 

8.  "The  question  of  the  single  tax  is  at  bottom  a  question  of  the 
ethics  of  the  institution  of  the  private  ownership  of  land."  Explain. 
What  light  does  this  statement  throw  on  the  nature  of  the  problem 
involved  ? 


XIV.     COMPREHENSIVE  SCHEMES  OF  SOCIAL  REFORM 
90. .  The  Voice  of  Social  Protest 

A.  A  ''program  of  social  reform"  is  implicit  in  the  preceding 
study.  However,  to  complete  our  treatment,  it  seems  necessary  to 
make  at  least  a  brief  reference  to  some  of  the  more-  radical  schemes. 
A  suitable  introduction  to  them  is  the  ever-old  and  ever-new  "cry 
for  justice,"  from  which  no  age  and  no  social  system  has  been  exempt. 

B.  14,  17,  27,  42,  46,  52,  71,  76,  79,  143,  200,  287,  312,  321,  322, 

329,350- 

C.  I.  Make  a  list  in  tabular  form  of  the  conditions,  institutions, 
etc.,  against  which  the  protests  given  in  the  reading  are  directed. 
2.  Contrast  and  compare  earlier  with  later  protests.  3.  Of  what 
value  is  a  study  of  "  the  voice  of  social  protest"  ? 

D.  I.  In  the  development  of  society  what  function  is  performed 
by  protest?  Which  makes  the  greater  contribution  to  the  develop- 
ment of  culture,  the  conservative  or  the  protestant?  the  "stand- 
patter" or  the  "progressive"?    What  is  a  "progressive"? 

2.  Why  has  America  in  the  past  been  relatively  free  from  "radical 
expressions"  of  dissatisfaction  with  things  as  they  are?  Is  this 
immunity  destined  to  be  permanent  ? 

3.  Compare  the  conditions  and  institutions  at  which  protest  is 
directed  in  non-industrial  and  industrial  societies  ?  Against  what  con- 
ditions and  institutions  do  modern  reformers  most  vigorously  protest  ? 

4.  "The  voice  of  protest  is  short-sighted  and  emotional.  It  is 
the  cry  of  those  without  imagination  and  power  of  abstraction  suffi- 
cient to  enable  them  to  take  a  comprehensive  and  long-time  view  of 
things."    Do  you  agree  ? 

5.  What  "Utopias"  have  you  read  ?  Were  they  descriptions  of 
ideal  societies  or  protests  against  the  schemes  of  institutional  arrange- 
ments under  which  they  were  written  ?  In  what  social  Utopia  would 
you  like  to  live  ? 

91.    Individualistic  Schemes  of  Reform 

A.  The  schemes  of  reform  presented  in  this  section  have  a 
double  value  as  an  introduction  to  socialism.  By  contrast  their 
"individualistic"  nature  reveals  the  "socialistic"  basis  of  the  other 
system.  Further,  they  reveal  institutions,  the  object  of  which  is  to 
give  the  industrial  laborer  a  fixed  status  in  the  scheme  of  things 

96 


COMPREHENSIVE  SCHEMES  OF  SOCIAL  REFORM        97 

industrial)   and  which   accordingly   find  places   in   the   socialistic 
program. 

B.  251,  305,  306,  323,  333.  ^      .   ^ 

C.  I.  If  the  laborers  are  ''scrub-humanity,*'  is  it  desirable  to 
better  their  conditions  ?  Is  it  possible  ?  2.  Can  co-operation  furnish 
a  solution  of  the  labor  problem  ?  3.  Is  profit-sharing  a  way  to  indus- 
trial peace  ?  4.  Is  the  difference  between  the  two  views  of  the  welfare 
of  the  laborers  in  the  steel  industry  due  to  a  difference  in  facts,  in 
prejudices,  or  to  something  else?  5.  Are  old-age  pensions  advanta- 
geous to  the  employers  ?  the  employees  immediately  affected  ?  em- 
ployees in  general  ?    the  public  ? 

D.  I .  ''  Poverty  is  the  wage  of  inertia."  "  Blessed  are  the  poor." 
Reconcile  these  two  statements. 

2.  "I  have  solved  the  labor  problem  so  far  as  my  own  factory  is 
concerned.  I  pay  my  men  a  little  higher  wages  and  maintain  a  little 
better  working  conditions  than  do  others  in  my  industry.  Anyone 
else  can  solve  his  problem  by  following  my  simple  remedy."  Can 
the  problem  be  solved  if  all  employers  go  and  do  likewise  ? 

3.  ''The  whole  of  the  present  social  unrest  has  its  root  in  a  lack 
of  identity  between  the  interests  of  labor  and  those  of  capital.  It 
will  disappear  straightway,  once  that  identity  is  established.  To  this 
end  only  the  simple  device  of  profit-sharing  is  needed."  Is  the 
problem  to  be  solved  so  easily? 

4.  "Profit-sharing  solves  the  labor  problem  by  giving  the  em- 
ployee an  interest  in  the  business."  "Profit-sharing  is  an  attempt  to 
bribe  the  laborer  to  accept  the  employer'sviewpoint,  philosophy,  and 
social  program."    Which  statement  is  true  ? 

5.  "Devices  such  as  welfare  work,  sickness  benefits,  and  old-age 
pensions  represent  an  attempt  to  force  'the  higher  efficiency'  upon 
the  laborer.  They  represent  attempts  to  'do  things  for  him,'  rather 
than  to  allow  him  to  work  out  his  own  salvation.  They  proceed 
from  assumptions  of  superiority  and  inferiority  in  society  and  of  the 
duty  of  the  superior  to  be  good  to  the  inferior."  Develop  this  argu- 
ment. Account  for  its  prevalence  among  laborers.  Is  it  an  adequate 
argument  against  "individualistic"  schemes  of  reform? 

6.  Make  a  list  of  the  institutions  mentioned  in  these  individualistic 
schemes  of  which  use  would  be  made  by  a  socialistic  state,  and  show 
the  use  which  socialism  would  make  of  each  of  them. 

92.    The  Socialist's  Indictment  of  Capitalism 

A.  Thus  far  socialism  has  presented  a  negative  rather  than  a 
positive  doctrine.  Its  concern  has  been  much  more  with  pointing 
out  defects  in  contemporary  social  arrangements  than  with  elaborating 


98         CURRENT  ECONOMIC  PROBLEMS 

new  arrangements.  Its  great  services,  in  the  development  alike  of 
economic  science  and  industrial  culture,  have  been  critical  rather 
than  constructive.  For  this  reason,  if  we  would  understand  socialism 
aright,  we  must  approach  it  as  an  economics  of  protest. 

B.  27,  52. 

C.  I.  State  and  criticize  the  theory  of  industrial  evolution  as 
outlined  by  Marx.  2.  Enumerate  the  particulars  in  which  socialistic 
critics  insist  that  "  capitalism  "  has  failed.  Appraise  their  arguments. 
3.  Is  there  any  inconsistency  between  Marx's  argument  and  that  of 
Macdonald  ?  4.  What  contributions  to  economic  science  have  been 
made  by  these  indictments  of  the  present  order?  5.  What  social 
problems  has  this  criticism  either  discovered  or  revealed  more  clearly  ? 

D.  I.  "Capitalism  is  a  mere  phase  of  the  evolution  of  society." 
Mention  and  briefly  describe  other  "phases."  Why  do,  or  do  you  not, 
think  that  capitalism  is  the  "final  form"  in  economic  development? 

2.  "In  the  beginning  the  Lord  created  heaven  and  earth,  but 
nowhere  on  the  landscape  was  there  a  particle  of  capital.  Then  the 
Lord  created  man;  still  there  was  no  capital.  Then  man  began  to 
labor,  and  lo!  there  was  capital,  created  by  the  labor  of  the  man." 
Does  this  argument  succeed  in  annihilating  capital  as  a  factor  of 
production  ? 

3.  "The  capitalistic  system  has  succeeded  admirably  in  solving 
the  problem  of  production.  Under  its  whips  and  in  search  of  its 
prizes  material  wealth  has  been  increased  a  hundred  fold."  Elaborate 
this  argument.  Its  implication  is  that  it  has  left  what  problem 
unsolved  ? 

4.  "Capitalism  lays  its  own  cuckoo  ^gg  in  the  nest."  "Because 
of  its  iniquities  we  should  see  to  it  that  the  capitalistic  system  is 
replaced  by  one  better  able  to  meet  human  needs."  Are  these  two 
arguments  consistent? 

5.  Socialism  is  usually  defined  in  terms  of  a  constructive  scheme 
for  the  reconstruction  of  society.  Does  this  disprove  the  statement 
above,  that  socialist  doctrine  is  negative  rather  than  positive,  critical 
rather  than  constructive  ? 

6.  Mention  various  ways  in  which  socialism  has  contributed  or 
is  likely  to  contribute  to  the  development  of  economic  science;  of 
industrial  culture.  Does  an  admission  of  the  value  of  its  contributions 
indicate  an  adherence  to  its  doctrines  ? 

* 

93.    The  Case  for  Socialism 

A.  The  case  for  socialism  is  quite  largely  the  case  against  capi- 
talism. But,  by  implication,  it  suggests,  at  least  in  very  large  outlines, 
a  general  theory  for  a  program  of  reconstruction. 


COMPREHENSIVE  SCHEMES  OF  SOCIAL  REFORM        99 

C.  I.  Distinguish  between  socialism,  communism,  and  anarch- 
ism. 2.  What  general  principles  underlie  the  proposal  of  a  social 
commonwealth?  3.  What  institutions  of  capitalism  would  be  re- 
tained in  the  socialistic  state  ?  4.  Is  there  a  clear  antithesis  between 
the  socialistic  and  the  capitalistic  forms  of  industrial  organization? 
5.  Is  socialispi  to  be  condemned  because  its  plan  of  social  reconstruc- 
tion is  not  worked  out  in  its  details  ? 

D.  I.  Why  did  the  spirit  of  social  protest  take  an  anarchistic 
form  in  the  England  of  the  eighteenth  century  ?  Why  does  it  take  a 
socialistic  form  in  modern  England  ?  Why  does  it  take  an  anarchistic 
form  in  Russia  and  a  socialistic  form  in  Germany  ? 

2.  "Socialism  is  based  fundamentally  upon  the  same  economic 
philosophy  as  capitalism.  Socialism  would  keep  the  capitalistic 
structure  of  society  intact.  It  would  change  only  the  equities  in  the 
ownership  of  property."    Defend  or  attack  this  statement. 

3.  "The  central  aim  of  socialism  is  to  terminate  the  divorce  of 
the  workers  from  the  natural  sources  of  subsistence  and  of  culture." 
Is  this  a  correct  statement  of  the  aim  of  socialism  ?  If  the  state  be 
substituted  for  the  private  owner,  will  the  sources  of  "subsistence 
and  culture"  be  any  more  accessible  to  the  workers  ?  If  the  divorce 
can  be  terminated,  its  termination  involves  what  changes  in  our 
institutional  arrangements  ? 

4.  Why  is  it  that  socialism  is  usually  thought  of  as  a  proposal  for 
economic  reconstruction  ?  why  not  political,  religious,  social,  or  even 
cultural  reconstruction  ? 

5.  Would  "personal  liberty"  have  the  content  in  a  socialistic 
society  which  it  now  has  ?  Would  there  be  more  or  less  of  it  ?  If  its 
content  is  different,  how  can  you  tell  whether  there  would  be  more 
or  less  ? 

6.  Which  of  the  following  institutions  would  reappear  under 
socialism:  the  market?  private  property?  contract?  pecuniary 
valuation?  competition?  the  wages  system?  capital?  interest? 
rent?  the  entrepreneur?  the  corporation?  the  state?  economic 
classes  ? 

94.     Socialist  Arguments  for  the  Masses 

A.  Socialist  writers  and  orators  are  much  too  clever  to  present 
to  the  masses  a  dispassionate  and  scientifically  accurate  recital  of 
the  comparative  merits  and  defects  of  capitalism  and  socialism. 
They  realize  quite  clearly  that  an  emotional  appeal  is  necessary  to 
make  converts.  We  must  not  forget  that  the  real  socialism  of  a 
majority  of  its  devotees  is  not  the  "socialism  of  analysis"  but  the 
"sociaHsm  of  propaganda." 

B.  27,  283,  312,  322,  354,  355. 


lOO         CURRENT  ECONOMIC  PROBLEMS 

C.  I.  Make  a  tabular  outline  of  the  charges  brought  against 
capitalism  in  these  readings.  2.  Explain  the  presence  and  increasing 
prevalence  of  these  views.  3.  Of  what  value  is  a  knowledge  of  these 
''arguments"  to  the  student  of  economics?  4.  Oi  what  value  is  a 
knowledge  of  economics  to  the  exponent  of  sociahsm. 

D.  I.  "All  over  this  land  workers  are  producing  food,  clothing, 
and  luxuries  that  others  consume;  they  are  building  houses  that 
others  live  in;  they  are  constructing  railroads  that  others  travel  over. 
When  socialism  arrives,  all  this  will  be  changed.  The  workers  will 
consume  the  food,  clothes,  and  luxuries  they  produce;  they  will  Uve 
in  the  houses  they  build;  and  they  will  travel  over  the  railroads  they 
construct."    Account  for  this  argument.    Appraise  it. 

2.  "All  value  is  produced  by  labor."  ''Sociahsm  offers  you  $1,800 
a  year  for  your  vote."  Show  how  the  figure  $1,800  is  arrived  at.  Can 
socialism  redeem  this  promise  ? 

3.  "A  laborer,  working  in  a  good  factory  with  up-to-date  equip- 
ment, can  produce  $10  of  goods  in  a  day.  But  he  gets  only  $2.  Some- 
body else  gets  $8.  Under  socialism  the  $10  would  go  to  the  laborer 
who  produced  it."  Admitting  the  last  statement,  would  all  of  it  go 
to  the  laborer  working  in  the  factory  ?    Should  all  of  it  go  to  "  labor  "  ? 

4.  "Since  there  is  just  so  much  work  to  be  done,  labor-saving 
machinery  robs  men  of  jobs.  It  is,  therefore,  the  deadUest  curse 
which  has  fallen  upon  the  human  race."  Cite  similar  evidence  of  the 
opposition  of  laborers  to  the  introduction  of  machinery.  What 
theory  lies  back  of  this  opposition  ?    Appraise  the  theory. 

95.     Socialist  Programs 

A.  Socialism  is  a  protest  and  an  ideal,  but  it  is  a  program  for 
immediate  action  as  well.  A  study  of  sociaUst  party  platforms  in 
historical  order  reveals  clearly  the  increasingly  conservative  character 
of  the  movement.  Something  of  its  present  conservatism  can  be  seen 
in  a  study  of  a  single  party  platform. 

C.  I.  Make  a  tabular  list  of  the  assumptions  upon  which  is 
based  the  theory  that  finds  expression  in  the  specific  demands  of 
sociaUst  platforms.  2.  Give  an  exposition  of  the  "  theory  of  socialism  " 
so  far  as  it  is  developed  in  these  platforms.  3.  Make  a  Hst  of  the 
"demands"  which  would  be  acceptable  to  large  bodies  of  men  who 
do  not  call  themselves  sociaUsts.  4.  What  have  you  left?  Is  this 
residuum  the  test  of  socialism  ? 

D.  I.  "As  any  movement  grows  older,  the  number  of  its  ad- 
herents increases,  and  it  becomes  better  known,  unconsciously  it  loses 
little  by  little  its  radical  character  and  becomes  conservative."  Can 
this  statement  be  made  to  serve  as  the  basis  for  a  history  of  Chris- 


COMPREHENSIVE  SCHEME^  ^  SOCIAL  1R?£*0RM       lOi 

tianity  ?    Is  it  applicable  to  the  sbcialisl'  inoveinkit:?' '  €an,  you  give 
other  illustrations  of  it  ? 

2.  "All  values  are  produced  by  labor."  "All  productive  property 
should  belong  to  society."  "All  iaitiative  in  industry  should  be  taken 
by  the  state."  Cite  evidence  in  the  "platforms"  showing  that 
socialists  do,  or  do  not,  believe  in  these  "principles"  today. 

3.  What  arguments  support  the  theory  that  socialism  is  to  be 
achieved  by  means  of  a  revolution  ?  that  it  is  to  come  through  evolu- 
tion? Do  you  expect  to  find  "evolutionary"  and  "revolutionary" 
socialists  agreed  on  a  program?  Do  the  platforms  given  represent 
the  demands  of  the  evolutionists  or  of  the  revolutionists  ? 

4.  Would  rent  be  paid  in  a  socialistic  state  ?  Would  its  recipient 
ever  be  a  private  individual  ?  Would  interest  be  paid  ?  If  so,  who 
would  receive  it?  By  what  standards  would  a  socialistic  state 
determine  rates  of  wages  ? 

5.  "To  each  according  to  his  personal  productive  contribution." 
Is  this  ideal  of  "distributive  justice"  definite  and  intelligible ?  Show 
just  how  in  practice  it  would  be  applied. 

96.    The  Case  against  Socialism 

A.  There  is  little  exaggeration  in  saying  that  socialism  means 
many  things  to  many  men.  Therefore,  in  advancing  arguments 
against  it,  or  in  studying  the  arguments  of  others,  one  must  be 
exceedingly  careful  to  correlate  the  attack  with  the  particular  kind 
of  socialism  which  is  attacked. 

B.  61,  67,  278,  325. 

C.  I.  Sketch  a  plan  by  which  the  transition  to  the  socialist 
state  may  be  effected  with  the  minimum  of  loss.  2.  Will  socialism 
rid  society  of  inequality  ?  Will  it  reduce  inequality  and  rid  it  of  the 
extremes  so  evident  under  the  present  system?  3.  Will  socialism 
endanger  "personal  liberty"?  4.  What  validity  is  there  in  the 
argument  that  socialism  will  cause  a  rapid  increase  in  population? 
that  it  will  discourage  thrift  ? 

D.  I.  " Under  individualism  the  scheme  of  prices  is  the  guide  to 
production.  It  effectively  regulates  its  nature  and  quantity.  For 
this  device  socialism  would  substitute  the  caprice  of  department 
heads.  The  result  would  be  a  great  loss  in  efficiency."  Examine 
carefully  this  argument. 

2.  "Under  socialism  a  higher  value  would  be  placed  upon  the 
mediocre  man.  But  a  socialistic  state  might  be  expected  to  fail  to 
single  out  for  important  work  men  of  real  genius,  to  give  them  oppor- 
tunities for  their  work,  and  to  reward  them  properly.    The  result  of 


I02  :  ^CURRENT  ECONOMIC  PROBLEMS 

this  f ailure-wovild  B6'i  perman^t'  loss  to  the  whole  of  society. ' '   Argue 
for  or  against  this  conclusion. 

3.  "The  contrast  between  inefficiency  in  politics  under  public 
management  and  efficiency  in  business  under  private  management  is 
the  contrast  between  the  inefficiency  of  socialism  and  the  efficiency 
of  individualism."    Is  the  contrast  a  true  one  ? 

4.  "The  immediate  gains  to  the  masses  through  socialism  would 
be  more  than  offset  by  the  ultimate  losses  which  the  system,  when 
once  thoroughly  established,  would  bring  about."  State  and  appraise 
this  argument. 

5.  "The  gains  which  socialism  would  effect  in  the  more  equitable 
distribution  of  wealth  would  be  more  than  offset  by  the  losses  in 
productive  efficiency  which  it  would  entail."    Do  you  agree? 

6.  "Socialism  is  coming,  not  by  conscious  choice,  but  by  the 
cumulative  action  of  a  large  number  of  seemingly  isolated  tendencies. 
Evidence  of  this  is  to  be  found  in  our  almost  complete  regulation  of  the 
railways,  in  increased  supervision  over  corporations  and  capitalistic 
monopolies,  in  the  conservation  of  natural  resources  through  public 
action,  in  the  regulation  of  immigration  and  of  population,  in  the 
measures  being  taken  for  the  elimination  of  economic  insecurity,  etc."  , 
Cite  the  evidence  furnished  by  the  preceding  study  of  tendencies 
toward  an  enlargement  of  social,  at  the  expense  of  individual,  rights. 
Does  this  evidence  confirm  the  statement  that  socialism  is  coming  ? 
are  the  tendencies  enumerated  bound  to  continue  and  to  grow  ? 

7.  "After  all,  the  real  question  is  not  whether  one  is  an  individual- 
ist or  a  socialist,  but  how  much  of  an  individuaUst  and  how  much  of  a 
socialist  he  is."    What  do  you  think  of  this  way  of  putting  it  ? 

97.     Social  Panaceas 

A.  The  multifarious  and  bewildering  character  of  our  industrial 
society  and  the  interdependence  and  complexity  of  its  problems  has 
been  insisted  upon  all  through  our  study.  At  its  close  it  can  perhaps 
be  emphasized  in  no  better  way  than  by  presenting  a  number  of 
panaceas,  each  the  work  of  a  "practical"  man,  and  each  based  upon 
the  conception  that  our  industrial  system  is  a  simple  and  easily 
managed  one. 

C.  I.  Account  for  the  prevalence  of  panaceas  for  economic  and 
social  ills.  2.  State  the  theory  impUcit  in  each  of  the  proposals  given, 
determine  its  assumptions,  and  criticize  them.  3.  Of  what  value  is  a 
study  of  social  panaceas  ? 

D.  I.  Why  is  it  such  a  common  habit  to  explam  things  in  terms 
of  a  single  cause  ?  Are  there  problems  in  which  such  an  ex-planation 
is  valuable  ?  Is  such  an  explanation  valuable  in  a  consideration  of 
"current  economic  problems"? 


COMPREHENSIVE  SCHEMES  OF  SOCIAL  REFORM      103 

2.  "The  opinions  of  the  b.usiness  man  on  fundamental  economic 
problems  are  generally  unsound;  for  he,  like  others,  has  a  habit  of 
generalizing  from  his  own  particular  business  and  applying  his  con- 
clusions to  industrial  society  as  a  whole.  Since  their  application  is 
to  a  situation  far  larger  and  more  complex  than  the  range  of  his 
observation  and  experience,  they  are  almost  certainly  invalid." 
Explain  in  detail. 

3.  "The  business  man's  concern  is  with  an  individual  business; 
that  of  the  political  executive  or  legislator  with  industrial  society  as 
an  entity.  They  are  dealing  with  problems  different  in  subject- 
matter,  in  method  of  approach,  and  in  remedial  proposals."  Explain. 
Does  this  imply  that  an  executive  has  no  use  for  knowledge  of  busi- 
ness ?  that  there  is  no  place  for  the  business  man  in  politics  ?  What 
does  it  imply  ? 

4.  Why  is  there  such  a  disposition,  particularly  in  America,  for 
every  man  to  be  his  own  political  economist  ?  Is  this  disposition  on 
the  increase  or  the  decrease?  Is  this  disposition  in  any  way  to  be 
connected  with  the  prevalence  of  panaceas  ? 

5.  "Popular  belief  in  social  panaceas  is  responsible  for  an  anti- 
intellectual  attitude  toward  current  problems.  It  prohibits  the 
careful  consideration,  the  painstaking  analysis,  and  the  deliberate 
formulation  of  programs  necessary  to  deal  with  them  intelligently. 
It  indicates  that,  so  far  as  economics  is  concerned,  the  public  is  still 
living  in  an  age  of  superstition."  Explain  this  argument.  What  is 
it  worth  ? 

6.  Is  the  prevalence  of  panaceas  due  to  a  conception  of  society 
in  static  and  mechanical  terms  ?  If  the  " evolutionary,"  or  " organic," 
viewpoint  should  become  dominant  in  the  popular  mind,  would 
panaceas  lose  their  hold  ? 

98.    Economics  and  the  Future  of  Society 

A.  If  the  course  of  study,  which  is  just  drawing  to  a  close,  bears 
any  meaning  at  all,  it  is  that  our  current  problems  are  slowly  develop- 
ing affairs,  that  they  are  intimately  associated  with  each  other  and 
with  the  developing  society  of  which  they  are  aspects,  that  they  tran- 
scend the  mere  economic  side  of  life,  and  that  their  "solutions"  are 
to  be  sought  in  a  comprehensive,  long-time,  and  ever-developing 
program.  For  a  very  tentative  statement  of  the  ends,  agencies,  and 
proposals  constituting  such  a  program  the  student  is  now  ready. 
The  very  shortcomings  of  his  attempt  should  show  him  quite  clearly 
his  particular  lack  in  factual  knowledge,  economic  principles,  general 
social  theory,  and  a  philosophy  of  life.  It  should  mark,  not  an  end, 
butVnew  beginning  of  study. 


104        CURRENT  ECONOMIC  PROBLEMS 

B.  General  Introduction,  Introduction  to  XIV. 

C.  I.  What  factors  require  that  economic  problems  remain 
always  with  us?  2.  Give  examples  of  some  of  the  more  immediate 
and  obvious  agencies  that  can  be  used  in  a  solution  of  current  prob- 
lems; of  some  of  the  more  immediate  and  obvious  things  which  can 
be  done.  3.  Illustrate  the  part  which  literature  and  art  are  likely 
to  play  in  social  and  economic  reform.  4.  Can  a  program  aiming  at 
less  rather  than  more  immediate  good  be  put  through  in  a  democracy  ? 
in  a  system  dominated  by  the  pecuniary  calculus  ? 

D.  I.  "The  Umited  amount  of  our  natural  resources,  the  lack 
of  identity  between  the  interests  of  social  groups,  and  an  antithesis 
between  present  and  future  values  guarantee  to  society  economic 
problems  for  all  time  to  come."  Explain.  Does  this  argument  imply 
that  economic  problems  are  equally  acute  in  all  ages  ? 

2.  "Modern  industrial  culture  can  be  characterized  by  the  three 
adjectives,  industrial,  pecuniary,  and  urban."  Show  that  each  of 
these  implies  the  other  two.  Show,  by  clear-cut  examples,  how  the 
nature  of  economic  problems  has  been  affected  by  the  character  of 
our  social  system.  Show  that  our  problems  are  quite  different  from 
what  they  were  in  the  earlier  stages  of  industrialism. 

3.  "Current  problems  are  not  affairs  of  the  moment.  Their 
temporary  forms  are  mere  passing  aspects  of  larger  and  more  com- 
plicated problems.  For  their  beginnings  we  must  look  into  the  far- 
distant  past.  They  are  in  process  of  gradual  solution.  Each  involves 
something  of  almost  every  phase  of  our  complicated  social  life."  By 
taking  as  an  example  some  one  of  the  problems  we  have, discussed, 
illustrate  each  of  these  statements. 

4.  "No  current  economic  problem  can  be  properly  understood  if 
it  be  studied  in  isolation."  Illustrate  from  the  topics  discussed. 
Can  economics  be  properly  understood  by  one  who  knows  nothing  of 
history  ?  of  political  science  ?  of  philosophy  ?  Show  the  contribu- 
tion which  each  of  these  subjects  makes  to  an  understanding  of 
economics. 

5.  "A  solution  of  an  economic  problem  cannot  be  found  by  a 
calculation  of  the  utilities  and  disutiUties  likely  to  follow  alternative 
proposals.  Every  proposal  involves  a  distribution  of  costs  and 
utilities  between  the  present  and  the  future,  and  between  different 
classes.  The  consequences  of  every  proposal  are  to  be  found  in  every 
aspect  of  life,  economic,  political,  religious,  social.  There  is  no  magic 
instrument  of  measurement  which  can  unlpck  such  a  riddle."  Illus- 
trate by  reference  to  the  alternative  proposals  for  solving  some  of  the 
problems  discussed  above. 

6.  "It  may  be  that  somehow  or  other  problems  get  'solved';  it 
may  be  that  they  merely  become  obsolescent  and,  like  old  machinery, 


COMPREHENSIVE  SCHEMES  OF  SOCIAL  REFORM      105 

are  'scrapped';  it  may  be  that  they  are  forced  to  surrender  their 
places  to  newcomers ;  or  it  may  be  that  they  tend  to  lose  their  identi- 
ties in  those  of  other  and  larger  problems."  By  concrete  illustration 
show  how  problems  have  been  ''solved"  in  each  of  these  ways. 

7.  "  It  is  usually  much  more  accurate  to  speak  of  the  development, 
rather  than  of  the  solution,  of  economic  problems."  Explain,  say, 
by  showing  how,  time  after  time,  the  problem  of  the  public  and  the 
railroads  has  been  solved. 

8.  "The  solution  of  an  economic  problem  involves  a  succession 
of  choices  between  conflicting  and  incommensurable  values."  Explain 
in  detail  with  illustrations.  Does  this  statemeat,  if  true,  encourage  or 
discourage  the  attempt  to  deal  with  problems  in  isolation  ? 

9.  "Both  the  very  existence  and  the  solution  of  problems  depends 
upon  contemporary  social  philosophy."    Explain  and  illustrate. 

10.  Reduce  the  problems  which  have  been  discussed  in  this 
course  to  the  smallest  number  possible.  Is  there  any  unity  among 
the  few  that  you  have  left?  Can  they  all  be  reduced  to  a  single 
problem  ? 

11.  Formulate,  in  as  great  detail  as  necessary,  a  comprehensive 
and  consistent  program  covering  all  the  problems  which  have  been 
discussed  in  this  course.  Begin  with  a  statement  of  the  general 
theory  of  the  ends  you  wish  to  accomplish,  the  agencies  you  wish  to 
employ,  and  the  methods  you  wish  to  use.  Follow  this  with  a  clear- 
cut  statement  of  your  several  proposals,  being  sure  that  they  are 
properly  classified. 

12.  Make  a  careful  criticism  of  the  tentative  program  which  you 
have  formulated.  Enumerate  the  points  upon  which  you  are  not 
sure  of  the  facts,  of  economic  principles,  of  general  social  theory,  of 
your  philosophy  of  life.  What  further  studies  in  economics  and  in 
the  humanistic  sciences  does  it  appear  that  you  should  make  ?  What 
seems  to  you  to  be  your  next  task  ? 


AN  INITIAL  FINE  OF  25  CENTS 

THIS    BOOK   °N    "^   "cents  ON  THE  FOURTH 

:;^^;rTo%-o  OH  "^  s^vewTH  o^v 

OVERDUE. 


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LD  21-95in-7,'37 


YB  05752 


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UNIVERSITY  OF  CALIFORNIA  UBRARY 


